Analys från DailyFX
GBP/JPY Technical Analysis: Churning From Channel to Range
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Talking Points:
- GBP/JPY Technical Strategy: Longer-term price action still bearish; post-Flash Crash price action range-bound.
- While GBP/JPY is typically a high-flying, heavy volatility pair – price action continues to remain subdued.
- If you’re looking for trading ideas, check out our Trading Guides; they’re free and updated for Q4.
In our last article, we looked at the bullish channel that had developed in GBP/JPY after the Sterling ‘flash crash’ earlier in October. And while a channel can be an attractive formation for many technical traders, the fact that such a small range had developed in what is traditionally such a high-volatility pair was, at the very least, disconcerting.
The good news is that the channel has broken, but the other side of that good news is the fact that price action in GBP/JPY remains relatively range-bound. And while this can be just as attractive as a relatively-consistent price channel, the fact that price action in GBP/JPY remains within an approximate 200-pip range should highlight the potential for a ‘big’ break in the not-too-distant future. GBP/JPY is traditionally one of the most volatile currency pairs that traders might come in contact with; and for volatility to be so subdued, traders would likely want to take this as a signal of caution that a ‘big’ move might be around the corner.
For traders looking to trade the current range in GBP/JPY, they’d likely want to be very comfortable with where stops are placed so that there’s no second-guessing if/when the range inevitably breaks. The current range in GBP/JPY is showing from approximately 126.00 up to ~128.00, and this would likely cap profit potential for range-bound setups.
Alternatively, traders can wait for the range to break before assigning a directional bias to GBP/JPY. With price action near resistance, traders can let the zone between 128-128.750 to be taken-out by rising prices before plotting the top-side approach. After 128.75 is broken, traders can then look to implement strategies with a bullish bias with swing-traders waiting for the next ‘higher-low’ on the hourly or 4-hour charts to stage approaches.
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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