Analys från DailyFX
EUR/JPY Technical Analysis: Bullish Run Turns into a Stampede
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Talking Points:
- EUR/JPY Technical Strategy: Intermediate-term: bullish; short-term: bullish.
- EUR/JPY has continued to shred through resistance levels, and is currently overbought on the daily time frame.
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In our last article, we looked at the bullish burst in EUR/JPY that started after the first round of French elections. After those elections, the risk trade gapped-higher when markets opened on Sunday and, for the most part, that move has only continued to heat-up. In our last piece, we looked at a key resistance level at 121.95 on EUR/JPY, and that level has been eclipsed by an exuberantly bullish run, and, at least as of yet, price action hasn’t yet pulled back. On the below chart, we’re putting this move in scope with the addition of the Relative Strength Index, which less than three weeks ago was dwindling in over-sold territory.
Chart prepared by James Stanley
Within the past three weeks we’ve seen quite a few drivers around EUR/JPY. Last week brought the European Central Bank, and despite Mr. Draghi’s dovish hints, the pair merely put in a minor pullback before buyers responding with even more demand. Yesterday brought a Federal Reserve rate decision, and that gave the risk trade another bump-higher as the Japanese Yen weakened against most major currencies.
So, at this point the bullish trend is encouraging in EUR/JPY but the levels that we’re trading at urge caution for continuation approaches. We’re already within the zone of resistance that had capped the bullish advance in December and January. And given that there’s been very little pullback on this out-sized run-higher, the litmus for continued gains will likely continue to increase; as we’ve seen numerous resistance levels shattered by higher prices with very little slowdown.
With a pivotal NFP report on the docket for tomorrow, this could be an opportune time to begin scanning for a pullback in the pair in the effort of trading a top-side continuation move. On the chart below, we look at three potential areas to watch for ‘higher-low’ support to build in the effort of bullish continuation.
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.
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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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