Analys från DailyFX
EUR/JPY Technical Analysis: Catching Fibonacci Support for a Higher-Low
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Talking Points:
- EUR/JPY Technical Strategy: Flat
- EUR/JPY continues working a new up-trend, setting higher-low support off of a key level.
- Renewed Japanese Intervention hopes could continue adding pressure on the Yen to further confirm up-trend.
After five consecutive days of gains last week, EUR/JPY faced selling pressure on Monday and Tuesday as buyers tightened up risk ahead of FOMC on Thursday. But a key support level has come into play that may be helping the pair carve out a higher-low, which could be accommodative for upcoming long positions.
The price in question is the 135 level on EUR/JPY, and this has been a price that’s seen considerable price action as both support and resistance over the past 15 years in the pair. This is a psychological level as it’s an even-rounded number that will often illicit new buyers or sellers into the market, but it’s also just 13 pips away from the 38.2% Fibonacci retracement of the ‘secondary move’ in the pair (shown in black on the below chart – taking the 2014 high and the 2015 low). And with now two days of support off of this zone, long positions could be attractive provided that an amenable risk-to-reward ratio is available. Traders could look to place stops below 135, and perhaps even just below the 134.81 level (which is the 38.2% retracement of the most recent major move, taking the August high to the September low). This would necessitate 130-140 pips of risk using current market prices; but targets could be daunting as a projected trend-line looms above price action, and numerous levels of resistance stand within 130 pips of current price. No entry will be taken until a more attractive risk-reward ratio may be made available.
Alternatively, continued resistance below 137 could re-ignite the bearish posture in the pair, at which point short positions become more attractive with targets cast towards that 135 support level, and then 134.81, followed by 133.82 (23.6% of the most recent major move).
Written by James Stanley of DailyFX; you can join his distribution list with this link, and you can converse with him over Twitter @JStanleyFX.
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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