Analys från DailyFX
EUR/JPY Technical Analysis: Confluence Awaits at the 120.00 ’Decision Level’
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Talking Points:
- EUR/JPY Technical Strategy: Near-term bullish with fresh 5-month highs.
- EUR/JPY has run into the 76.4% retracement of the Brexit move, but a more pertinent resistance level looms just a bit higher on the chart.
- If you’re looking for trading ideas, check out our Trading Guides.
In our last article, we looked at the prospect of a new bullish trend in EUR/JPY as the pair surged to fresh three-month-highs, bursting above a previously strong zone of resistance around the 116.37 level.
And since that last article, Yen weakness has continued in a very big way; leading to significant top-side breaks in many Yen-pairings such as USD/JPY, GBP/JPY and of course, EUR/JPY. Of those three, the move in EUR/JPY may be the most vulnerable, as the potential for an extension of European QE out of the ECB can carry the potential to drive the Euro-weaker in the weeks ahead. If we combine this with a series of resistance levels sitting just above price action, and traders would likely want to move forward on continuation moves with a heavy amount of caution. For those looking to trade in Yen-weakness, more attractive venues may be seen in pairs with base currencies carrying lessened ‘QE-risk’, such as AUD/JPY or the aforementioned USD/JPY or even GBP/JPY.
A big ‘decision level’ on the pair can be seen at the psychological level of 120. This level is significant because not only is it a round-figure on the pair, but it’s also just 10 pips away from the 61.8% Fibonacci retracement of the 16-year major move in EUR/JPY. Traders that are looking to stage top-side approaches would likely want to let this level first break to prove that bulls might be able to continue pushing the move-higher. Should that take place, traders can then use this potential level of resistance to try to find that ‘higher-low’ of the continuation move.
Chart 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.
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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