Analys från DailyFX
GBP/JPY Technical Analysis: Digging-In to the Trend
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Talking Points:
- GBP/JPY Technical Strategy: Bullish; near-term price action retracing after setting fresh 2-month high.
- GBP/JPY is finally retracing after the nearly 2,000-pip run from the lows of election night.
- If you’re looking for trading ideas, check out our Trading Guides.
In our last article, we looked at the continuation of the recent bullish move in GBP/JPY. After spiking down to a low of 126.70 on the night of the U.S. Presidential Election, GBP/JPY spent the next three-and-a-half weeks rallying-higher, totaling a run of almost 2,000 pips (1,933.6 to be exact).
As we had looked at previously, there exists the legitimate prospect of both fundamental and technical themes in GBP/JPY aligning in the same direction. The British Pound has been rather strong since the Bank of England’s Super Thursday earlier in November; and the Japanese Yen has been extremely-weak as the prospect of even more bond purchases has helped to keep the Yen moving-lower. And from a technical perspective, the extremely-bullish nature of price action since the Presidential Election meshes-up very well with this fundamental-drive; thereby creating the exciting scenario in which traders could legitimately imagine a bullish trend driving GBP/JPY higher for weeks or perhaps even months ahead.
There is but one problem with such aligned-trends: There’s often very little room to jump-in. If a market is extremely bullish and the fundamental backdrop is pointing in that direction as well, we’ll often see very little ‘giveback’ in the trend. Retracements will often run a bit more-shallow, price action will usually spend less time at support and traders, frankly, won’t usually wait around to buy. This means that the trader needs to adjust by either a) accepting slightly sloppier entries (which can be countered with smaller positions and looser stops) or b) becoming more prudent on the entry trigger, accepting the fact that they might miss out on the trade altogether by being more patient (this can be most difficult to contend with for those suffering from FOMO, or the fear of missing out).
But regardless of which way the trader chooses to handle ‘exuberant trends,’ the utilization of support will be the same. It’s a near-necessity in staging trend-based approaches because this is how risk is managed so that, should the ‘trend that is your friend’ happens to bend, well at least you’re not going to be married to the bad trade.
On GBP/JPY, we have a series of such levels that traders can integrate for re-entry approaches. At 143.23 (currently being tested), we have the post-Brexit swing-high. A bit-lower at 142.50, we have a major psychological level that’s also offered swing-support to open this week. And below that at 141.55 we have a Fibonacci level that had helped to set resistance just ahead of the most recent retracement on GBP/JPY (this level was also the final target from our last GBP/JPY analyst pick).
On the resistance side of GBP/JPY, 145 is a major psychological level, and a bit-higher at 146.04 we have the most recent swing-high (set on Monday), and either of these can be an ideal initial targets. At 147.03 and 148.53 we have long-term Fibonacci levels that can function as secondary and tertiary profit targets, respectively. And should 148.53 get taken out, additional targets could be cast towards the big figure at 1.5000 and then 151.93 (Fib value and April 2015 swing-low).
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
To be added to Christopher’s e-mail distribution list, please fill out this form
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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