Analys från DailyFX
EUR/JPY Technical Analysis: Welcome Back, Big Figure (¥120.00)
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Talking Points:
- EUR/JPY Technical Strategy: Intermediate-term: congested; near-term: bearish.
- EUR/JPY was unable to hold support zones at 121.65 and then 120.82; with price action now testing a hugely critical zone for EUR/JPY around the ¥120.00-psychological level.
- 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 the potential for bullish continuation prospects in EUR/JPY. After the ECB meeting from the week-prior, the pair had ran-up to set a new short-term high; after which a retracement of that bullish move had set-up a ‘higher-low’ around a key zone of support in the range between 121.65-121.95.
This support did not hold; and since then, we’ve had bears envelop near-term price action in EUR/JPY as the pair has shredded down to a deeper, perhaps more pivotal level of potential support. This level around ¥120.00 is very important to EUR/JPY price action; as just ten pips below we have a key Fibonacci retracement level at 119.90 – which is the 61.8% retracement of the 25-year move in the pair (taking the highest high (2008) and lowest low (the year, 2000) of the past 25 years).
Chart prepared by James Stanley
Traders would likely want to avoid chasing the move-lower from here. This near-term burst of weakness could certainly carry continuation potential; but the prospect of selling whilst at a key area of long-term support could be daunting.
For those that do want to sell, they’ll likely want more information before plotting that strategy: Either a continued down-side run that could open the door for utilizing ¥120.00 as ‘lower-high’ resistance; or perhaps letting price action run up to a shorter-term swing point such as ¥120.82. Either of these methods could make for a more attractive way of looking for continuation rather than just chasing the move-lower.
On the bullish side, traders would likely want to see some element of support before looking to get long. If we can get some evidence of such, the prospect of a reversal setup could become considerably more attractive. But – if no support around ¥120.00 – no reversal. Catching falling knives can be a perilous task.
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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