Analys från DailyFX
EUR/JPY Technical Analysis: Break Down to a Big Level
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Talking Points:
- EUR/JPY Technical Strategy: Longer-term range still applicable, near-term indications of bearish price action.
- EUR/JPY posed a quick break below ¥120.00, then catching a ‘higher-low’ at 120.14. .
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In our last article, we looked at resistance showing in EUR/JPY at an area that was previously support around the 121-handle. And given that this happened shortly after a test below the 120-psychological level, the potential for a continuation of ‘lower lows’ and ‘lower highs’ brought along the prospect of range-like price action in the pair to finally yield.
After the open of trading this week, EUR/JPY continued to sell-off after reacting to last week’s resistance; and bearish momentum appeared to continue to gain speed as we tested deeper support levels at 120.14, 119.91 and then 119.30. This was likely driven, at least in part, by a dose of political risk around French elections. But as risk aversion around French elections appeared to soften this morning, support came in on EUR/JPY around an extremely interesting level; highlighting how the prior bullish trend that started after the U.S. Presidential election is holding on by a thread.
After this morning’s support test, buyers came-in fairly quickly around the announcement that French Presidential candidate Francois Bayrou was dropping out of the race in order to further support an alliance with Emmanuel Macron. This seemingly decreased the odds of a Marine Le Pen victory, which has largely been considered a Euro-negative. So this is still very much a fluid, developing situation; similar to Brexit or the U.S. Presidential Election in that matters are due to change very quickly.
From a price action perspective – those looking to trade further Euro breakdown could seek out a short-term setup utilizing the prior batch of resistance, around 120.40 for risk placement, targeting that same prior low around 118.60.
For those investigating bullish stances, they’d likely want to see prices breaking above that batch of resistance at 120.40 to prove that buyers may be able to take control of the situation; after which a support test in the zone from 119.91-120.14 could offer the top-side trigger.
— 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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