Analys från DailyFX
EUR/JPY Technical Analysis: Pre-ECB Resistance Check
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Talking Points:
- EUR/JPY Technical Strategy: Intermediate-term: Mixed, short-term bullish
- EUR/JPY has put in an aggressive move off of a key support zone, but with the European Central Bank set for another rate decision tomorrow, EUR/JPY is working very near a key zone of resistance.
- If you’re looking for trading ideas, check out our Trading Guides, they’re free and updated for Q1, 2017. If you’re looking for shorter-term ideas, check out our Speculative Sentiment Index (SSI) indicator.
In our last article, we looked at an ebullient reaction off of a key zone of support in EUR/JPY around the ¥118.50 area. As we discussed, with a top-side break above a down-ward sloping trend-line combined with the bullish drive above the key psychological level of ¥120.00, the potential for a trend-shift was beginning to show in EUR/JPY.
Since then, we’ve seen price action work-higher towards a zone of resistance that had held in the pair for much of February. This is also a prior zone of support, further adding to the intrigue of using 121.00 for directional plays.
Chart prepared by James Stanley
With the European Central Bank set to deliver another rate decision tomorrow, Euro-pairs could put in significant movement. This likely wouldn’t come from any change in rates, as little is expected there; but more likely on the prospect of Mr. Draghi alluding to the potential for further tapering of QE-outlays as European economic data has been showing signs of improvement.
Nonetheless – this is a major rate decision with a heavy potential for volatility given market sensitivity to fears of a ‘taper tantrum’. Mr. Draghi will likely be walking on eggshells: Markets will probably be looking for any innuendo they can grasp on to in the effort of getting a clue as to what Mr. Draghi and the ECB at-large are thinking.
For those that want to take-on long exposure in EUR/JPY, letting this zone of resistance first yield could make the prospect of continuation more attractive. There’s another, less pertinent zone of resistance between ¥121.65-¥121.96: Should this current zone of resistance around ¥121 give way, the deeper area of resistance could offer a short-term respite to price action, at which point the current area of resistance could then be re-assigned as support:
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
You can receive Paul’s analysis directly via email bysigning up here.
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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