Analys från DailyFX
EUR/JPY Technical Analysis: Bull Flag Break Opens Door for Continuation
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Talking Points:
- EUR/JPY Technical Strategy: Long-term bullish, intermediate-term: mixed, short-term: bullish.
- EUR/JPY has posed a topside break of a bull flag formation, opening the door for bullish continuation.
- If you’re looking for trading ideas, check out our Trading Guides. If you’re looking for shorter-term ideas, check out our IG Client Sentiment.
In our last article, we looked at EUR/JPY testing longer-term support after the June ECB rate decision. At that rate decision, the European Central Bank echoed a dovish tone which produced a short-term burst of Euro weakness. But buyers showed-up around prior support, and a week later we saw another iteration of support around the 122.50 area, eventually leading to a top-side break of the bull flag formation in EUR/JPY.
Chart prepared by James Stanley
As we remarked in our prior article, given the potential for a continuation of bullish price action, taken from a combination of EUR/JPY’s adherence to longer-term support structures combined with the fact that the pair shrugged off a series of negative factors without a more pronounced sell-off; and traders can move-forward with a bullish bias on the pair. On the 4-hour chart below, we’re zeroing-in on that support structure that can be found around the psychological level of ¥122.50.
Chart prepared by James Stanley
For entry protocol: We’re dialing-in on the hourly chart below with a Fibonacci retracement applied to the most recent bullish move, taking the low set last week up to the high set just yesterday. Current price action is finding support at the 23.6% retracement of this move, and for those that want to move-forward in an aggressive manner on EUR/JPY, this could be usable with stops applied below the 123.50 level, as this is the 50% retracement of that most recent major move.
For those that want to move-forward a bit more conservatively, that same 123.50 level could be used to look for deeper support, at which point the door can be opened for bullish reversal plays with stops applied below the prior low of 122.35.
Chart prepared by James Stanley
— Written by James Stanley, Strategist 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
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
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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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