Analys från DailyFX
EUR/JPY Technical Analysis: A Thicket of Resistance Awaits
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Talking Points:
- EUR/JPY Technical Strategy: Range-bound past three months, price action nearing resistance of range.
- EUR/JPY put in a volatile day of price action, having pierced through near-term support to bounce higher into resistance.
- If you’re looking for trading ideas, check out our Trading Guides.
In our last article, we looked at EUR/JPY after the pair began to show bullish characteristics while still entangled in the longer-term range. We had emphasized the level at 114.11, as this was the 38.2% Fibonacci retracement of the ‘Brexit move’ in the pair while also having shown as prior resistance. As of our last article, this level had begun to show as fresh support, and this led-in to another move-higher to, again, test resistance at the 50% retracement of that same Fibonacci setup at 115.62.
Last night’s tumult around the U.S. Presidential Election brought another test of support at the 114.11 level, followed by another move-higher to resistance at 115.62; thereby further confirming this Fibonacci retracement as a mechanism that can provide usable information to traders.
With price action now sitting near resistance, traders can move forward accordingly by either a) looking to get short in the effort of trading the next side in the range or b) waiting for prices to break above resistance before assigning a bullish bias to the pair. Given the pandemonium that’s been seen across global markets around the U.S. Presidential Election, the latter of those options would likely be the most attractive as it comes with the lowest risk outlay (no exposure taken-on by waiting for confirmation).
At this zone of resistance are multiple price action swings from the past three months with numerous failed tests of resistance. The Apex of these swings shows at approximately 116.64; just a little more than 100 pips away from current prices. Should price action continue to be bid higher, breaking resistance, traders can then look to get long on a ‘higher low.’ The 61.8% retracement of that same Fibonacci setup is at 117.13, and this can be an opportune area to look for that ‘higher high’ to come-in before looking to buy a ‘higher-low’ in the pair.
Chart prepared by James Stanley
— Written by James Stanley, Analyst for DailyFX.com
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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
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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
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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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