Analys från DailyFX
EUR/JPY Technical Analysis: BoJ Brings Range Support
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Talking Points:
- EUR/JPY Technical Strategy: Long-term down-trend, intermediate-term range-bound with recent move down to support.
- EUR/JPY has stayed within a 450-pip range for the past month and a half, and this compression of volatility may be preluding a ‘big’ move in the not-too-distant future.
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In our last article, we looked at the continue range in EUR/JPY with price action working a Fibonacci retracement from the ‘Brexit range’ on the pair that had seen numerous support and resistance inflections. But as we advised, an upcoming BoJ decision had the potential to add considerable volatility to the mix with a strong probability of the range finally giving way.
And while that BoJ announcement did bring on considerable volatility in the Yen, but this merely brought in prior range support in EUR/JPY. The zone of support around the 112-handle is interesting as there are at least three different mechanisms of support at work around this level. At 112.02 we have the 23.6% retracement of the 2008 high to the 2012 low, and at 112.47 we have the 23.6% retracement of the Brexit-move in the pair, and this level saw multiple support inflections in August; and just a few pips above that we have the 112.50 psychological level on the pair.
Of interest on the longer-term setup is whether or not support holds here above the prior swing-low in July at the 110.85 area, which was above the ‘Brexit low’ at 109.54. Should this support hold at 112, top-side plays could be attractive in the effort of trading a longer-term reversal in the pair to look for an eventual break of range resistance. On a near-term basis, traders could investigate bullish positions in the effort of trading the range up to resistance. On the top-side of price action, traders can look for resistance at the 114.30 level which was the swing-high yesterday as well as being the 38.2% retracement of the Brexit move. Just above that we have the 61.8% retracement of the ‘Abe move’ in the pair, taking the 2012 low to the 2015 high.
Chart created with Tradingview; 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.
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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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