Analys från DailyFX
EUR/JPY Technical Analysis: Down-Trend at ’Decision Point’
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Talking Points:
- EUR/JPY Technical Strategy: Big-picture down-trend working on higher-lows, very near longer-term base of support.
- EUR/JPY is up over 100-pips off of last week’s lows and fast approaching prior price action support. Should price action break above this zone + a projected trend-line, top-side strategies could become attractive.
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In our last article, we looked at the breakdown in EUR/JPY on the heels of a BoJ rate decision that left many market participants wanting for more. While expectations for enhanced stimulus out of Japan were running extremely high going into the most recent BoJ decision, the bank largely underwhelmed and this created a sharp move of Yen strength as stimulus bets priced-out of Japanese markets. But have we heard the last from the Bank of Japan? Probably not, and more likely, other market participants are harboring the expectation for the BoJ to come to the table with something ‘big’ before the end of the year.
None-the-less, price action in EUR/JPY at this point remains bearish as denoted by a recent series of lower-lows and lower-highs that have come-in post-BoJ. We do have the initial makings of what could be a top-side reversal, as prices have moved more than 100 pips off the lows into an interesting area of potential resistance. Just a few pips above current levels is prior price action swing support at 113.88, and just a few pips above that we have a projected trend-line that can be found by connecting the Brexit low at 109.19 to the July swing low at 110.81. Should price action break above this zone of potential resistance, then traders may be able to look at the long-side of the pair under the premise of trading bullish continuation.
Traders looking to get long would likely want to wait for price action to break above this area of potential resistance in order to confirm top-side sustainability before looking to trigger the position. Should price action break above this area around 113.88, top-side targets could seek out an initial level of 115.37, which is the 61.8% Fibonacci retracement of the ‘Abenomics move,’ taking the low in 2012 to the high in 2014. This level had also seen quite a few swings around the erratic price action during the post-Brexit environment; and above that we have a prior price action zone of resistance around 116.80, followed by the psychological level at 117.50 and then the July high at 118.45.
Alternatively, the short-side of the pair could be attractive for short-term momentum strategies until this zone of resistance at 113.88 becomes broken; but traders utilizing longer-term approaches would likely want to tread cautiously around the prospect of bearish continuation while near the well-established zone of support around the 110-big figure.
Created with Marketscope/Trading Station II; 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
To be added to Christopher’s e-mail distribution list, please fill out this form
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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