Analys från DailyFX
EUR/JPY Technical Analysis: Plotting Next Higher-Low Support
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Talking Points:
- EUR/JPY Technical Strategy: Bullish, retracing after ECB extended QE.
- EUR/JPY ran up to a fresh 7-month high, catching resistance at a long-term Fibonacci level of 123.09.
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In our last article, we looked at the burgeoning uptrend in EUR/JPY with a watchful eye on the major psychological level around 120.00. And less than 10 pips below that 120-level we have a long-term Fibonacci level as 61.8% of the major move spanning the low from the year 2000 to the high set in 2008.
We had discussed the importance of this level two weeks ago, positing that should price action finally break back-above 120, traders could move forward with a bullish bias, looking to buy higher-low support once the trend finally saw some element of pullback or retracement. This morning’s European Central Bank announcement may have finally started this pullback, and with prices heading-lower, traders can now begin to plot for that next level of ‘higher-low’ support.
With 120 being such an obvious level, this could be an ideal place to look for some element of support around this zone in the effort of using ‘old resistance as new support’. For traders looking to plot top-side entries off of support at 120.00, the prior swing-low at 118.50 could be an attractive area to investigate for risk levels, with stops being lodged below this prior zone of support.
For traders looking to be a bit more aggressive with the bullish move, a prior swing-low at 120.85 may help provide some element of near-term support. Top-side entries here could be coupled with a stop below that confluent 120.00 level.
On the resistance side of EUR/JPY, at 121.95 we have the 50% retracement of the ‘Abe-nomics’ move in EUR/JPY, taking the 2012 low up to the 2015 high; at 123.09 we have the 38.2% retracement of the major move of the 2008 high down to the 2012 low; and at 125.00 we have a major psychological level in EUR/JPY that has historically been an important level for the pair. Each of these can function as targets for top-side continuation approaches.
The prior swing-low at 118.50 could be looked at as a form of invalidation of recent bullish momentum. Traders plotting long positions would likely want to question the veracity of the trend should this swing-low get taken-out.
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.
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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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