Analys från DailyFX
EUR/JPY Technical Analysis: Long-Term Support, Short-Term Resistance
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Talking Points:
- EUR/JPY Technical Strategy: Long-term bullish, intermediate-term: mixed, short-term: range-bound.
- EUR/JPY dropped yesterday after a dovish ECB outlay; but has since found support around a longer-term level, and is currently testing short-term resistance.
- 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 the bearish swing in EUR/JPY after price action put in a ‘failure high’ in the week prior. But given the fact that buyers had continued to show-up around a longer-term support zone that carries a rather bullish connotation around 123.22, the long-term trend continued to offer bullish perspective as buyers retained support at the 23.6% retracement of the ‘bigger picture’ bullish move.
Since then, we’ve had a number of negative factors for EUR/JPY show up, including a very dovish European Central Bank meeting yesterday. Price action tested prior lows around 122.50 but, again, bulls remained rather vigilant as that dip was bought and price action perched back-above support at 123.22.
Chart prepared by James Stanley
On shorter-term charts, we can see where price action in EUR/JPY is testing near-term resistance around 123.75.
Chart prepared by James Stanley
Given that we may potentially be at a turning point for a return of bullish price action, the door can be opened for topside continuation strategies. Traders looking to exude a bit more caution can wait for near-term resistance around 124.07 (the ECB swing-high) to give way as a bit of additional confirmation that this short-term strength might continue in the direction of the longer-term trend.
Stops for bullish strategies can be investigated below this recent ‘higher-low’ in the 122.75 area; but for those that want to maximize distance on the entry, stops can be investigated below the ‘bigger picture’ swing-low of 122.50.
— 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
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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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