Analys från DailyFX
EUR/JPY Approaches Major Reaction Point
Talking Points:
- Pullback in Overall EUR/JPY Uptrend
- Tight Consolidation on Daily Chart
- Key Resistance Zone for Initiating New Shorts
EURJPY is at one of those confluences of decision points where a sizable move could materialize. The only challenge is that the price action could go in completely opposite directions, and it is unclear which direction will prevail.
On the weekly chart below, price is pulling back to a rising level of support in a major uptrend, which would normally be a sign to go long. However, there are about 1300 pips to the downside, and at least 500 to the upside. Needless to say, as long as the trend line proves reactive, there is compelling reason to take a trade here.
Guest Commentary: Pullback in an Overall EUR/JPY Uptrend
If this were occurring on the daily chart, then it would be a clear buying opportunity. However, given that few traders are willing to wait weeks for a trade to develop, it becomes more complicated, especially since the below daily chart presents a rather different scenario.
As shown, a clear retracement trend is in force, as denoted by the declining parallel channel. Closer examination will prove that price has not really reached the rising support from the weekly chart just yet, and thus, the most prudent play would be to try to hop on short in anticipation of a proper test of that support. If it holds, there will still be 250 pips to be captured, and if it breaks, the 1300 pips could then be properly on the table.
Guest Commentary: Tight Consolidation on EUR/JPY Daily Chart
Given this very attractive proposition, it is worth looking for signs of a rejection of the previous consolidation area, as marked on the daily chart.
Meanwhile, the four-hour chart below provides a resistance zone that is 81 pips deep and based off the previous consolidation area. The exact levels are 141.05-141.86, and a sound rejection of this zone would provide the momentum to the downside.
Guest Commentary: Key Resistance Zone for EUR/JPY
This trade is best taken on the hourly chart (not shown). Price action on the hourly time frame has proven somewhat indecisive, so it may take two or three tries to get in on a proper short move, but the risk is obviously much smaller on this frame. Pin bars, bearish engulfing patterns, and bearish reversal divergence are all viable entry triggers, but given the indecision, traders might be better off having two positions in order to scale out quickly should price hesitate to move in our favor.
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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