Analys från DailyFX
An AUD/JPY Channel Set-up with "a Twist"
Talking Points:
- ”Hidden” Reaction Level for AUD/JPY
- Key Resistance Zone for New Short Positions
- Wolfe Wave Pattern on AUD/JPY Hourly Chart
It is rare for a choppy daily range to be of greater interest than a clean trending one, but with many of the cross currencies either in mid-trend or taking their time in pulling back, the most interesting set-up right now may actually be occurring in AUDJPY.
The daily chart below shows a consolidation within a triangle pattern, but there’s a twist. There is a hidden reaction level comprised of several previous tops, and with price once again approaching this level, it could well be the source of another reaction.
Guest Commentary: “Hidden” Reaction Level for AUD/JPY
In consolidations, it is more realistic to aim for the rising line of support, which is approximately 170 pips or more away, but this is reasonable provided a good entry with tighter risk can be obtained.
As the reaction level is, by definition, a hidden one, it is wiser to allow for a certain degree of overshoot. There aren’t many previous horizontal levels of support or resistance to analyze, but nevertheless, the final resistance zone has been estimated on the four-hour chart below as 93.46-93.99.
Guest Commentary: Key Zone for Selling AUD/JPY
Price reacting off this 53-pip zone of risk may well begin a move lower, and even if not, the narrow overall risk profile adds validity to this set-up. Nonetheless, a better entry with even lower risk may be obtained from entering on a lower time frame like the hourly one below.
On the hourly chart of AUDJPY, there’s no particularly clear patterns other than a jagged Wolfe wave that may be developing. At the time of writing, price had already overshot the top of the channel, which is a requirement for the wave. Those who wish to obtain an entry this way will have to wait for price to close back below the top of the channel. As a result, this is best thought of as a “channel overshoot” type of trade.
Guest Commentary: Wolfe Wave on AUD/JPY Hourly Chart
That said, there are several versions of the Wolfe wave, and the conditions here are minimalistic and sufficient according to past experience. This isn’t always the case, however.
In any case, standard triggers will apply, including pin bars, bearish engulfing patterns, and/or bearish reversal divergence on the hourly chart. A turn down from the highlighted resistance zone with any of these triggers would signal a sufficient short-entry opportunity. As usual, though, it may require two or three attempts in order to get in on this potential move.
By Kaye Lee, private fund trader and head trader consultant, StraightTalkTrading.com
What’s inside:
- EURUSD broke the ‘neckline’ of a bearish ‘head-and-shoulders’ pattern, April trend-line
- Resistance in vicinity of 11825/80 likely to keep a lid on further strength
- Targeting the low to mid-11600s with more selling
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Coming into last week we pointed out the likelihood of finally seeing a resolution of the range EURUSD had been stuck in for the past few weeks, and one of the outcomes we made note of as a possibility was for the triggering of a ’head-and-shoulders’ pattern. Indeed, we saw a break of the ’neckline’ along with a drop below the April trend-line. This led to decent selling before a minor bounce took shape during the latter part of last week.
Looking ahead to next week the euro is set up for further losses as the path of least resistance has turned lower. Looking to a capper on any further strength there is resistance in the 11825-11880 area (old support becomes new resistance). As long as the euro stays below this area a downward bias will remain firmly intact.
Looking lower towards support eyes will be on the August low at 11662 and the 2016 high of 11616, of which the latter just happens to align almost precisely with the measured move target of the ‘head-and-shoulders’ pattern (determined by subtracting the height of the pattern from the neckline).
Bottom line: Shorts look set to have the upperhand as a fresh month gets underway as long as the euro remains capped by resistance. On weakness, we’ll be watching how the euro responds to a drop into support levels.
For a longer-term outlook on EURUSD, check out the just released Q4 Forecast.
EURUSD: Daily
—Written by Paul Robinson, Market Analyst
You can receive Paul’s analysis directly via email bysigning up here.
You can follow Paul on Twitter at@PaulRobinonFX.
Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.
EURUSD: Retail trader data shows 37.3% of traders are net-long with the ratio of traders short to long at 1.68 to 1. In fact, traders have remained net-short since Apr 18 when EURUSD traded near 1.07831; price has moved 9.6% higher since then. The number of traders net-long is 15.4% lower than yesterday and 16.4% higher from last week, while the number of traders net-short is 0.4% higher than yesterday and 10.5% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EURUSD prices may continue to rise. Positioning is more net-short than yesterday but less net-short from last week. The combination of current sentiment and recent changes gives us a further mixed EURUSD trading bias.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
To be added to Christopher’s e-mail distribution list, please fill out this form
Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.
GBPUSD: Retail trader data shows 38.2% of traders are net-long with the ratio of traders short to long at 1.62 to 1. In fact, traders have remained net-short since Sep 05 when GBPUSD traded near 1.29615; price has moved 3.4% higher since then. The number of traders net-long is 0.1% higher than yesterday and 13.4% higher from last week, while the number of traders net-short is 10.6% lower than yesterday and 18.3% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBPUSD prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current GBPUSD price trend may soon reverse lower despite the fact traders remain net-short.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
To be added to Christopher’s e-mail distribution list, please fill out this form
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