Analys från DailyFX
EUR/JPY Technical Analysis: The Three-Month Bull Flag Continues
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Talking Points:
- EUR/JPY Technical Strategy: Intermediate-term: congested; near-term: bearish.
- EUR/JPY has fallen back-below the psychological level at 120.00, but a key zone of support lurks below.
- If you’re looking for trading ideas, check out our Trading Guides. If you’re looking for shorter-term ideas, check out our Speculative Sentiment Index (SSI) indicator.
In our last article, we looked at EUR/JPY as price action worked-around a pivotal psychological level at 120.00. As we had shared, the zone around 120.34 could be attractive for short-term bearish continuation prospects, and after a few days of resistance showing around that level, prices have fallen back-below support to establish a fresh short-term low.
But as that low came-in this morning, we saw buyers return to cauterize that move rather quickly. This highlights the bigger picture setup in EUR/JPY, which has been slightly bearish since the Fed’s December rate hike; but still bullish on net when taken in consideration of the previous bullish move. This creates a bull flag formation as shown below:
Chart prepared by James Stanley
With a big zone of potential support approximately ~100 pips below current price action, bearish continuation strategies may be unattractive here until more confirmation is had that bulls may finally relent on a subsequent re-test of this support area. More interesting, however, would be a reversal of short-term bearish price action into the direction of the longer-term bullish trend. This would entail support continuing to show above the February low in order to create a ‘higher-low’; at which point bullish strategies can become favored again in anticipation of another re-test of resistance and, eventually a top-side break to continue the bullish pattern.
Below, we look at what traders can watch for in the effort of setting-up with this theme.
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.
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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