Analys från DailyFX
GBP/JPY Technical Analysis: May’s Support is Now Resistance
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Talking Points:
- GBP/JPY Technical Strategy: Long-term mixed, intermediate-term: bearish, short-term: congested.
- GBP/JPY put in a quick topside run this morning, but resistance showed at the key Fib level of 141.59.
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In our last article, we looked at GBP/JPY as a bearish channel found support around the vaulted psychological level of ¥140.00. But as we shared, given the backdrop of another round of U.K. elections that seemingly made the context around upcoming Brexit negotiations even more-cloudy, traders would likely want to retain somewhat of a down-side bias. We had also looked at the key zone of prior support and potential resistance at the ¥141.59 level, which is the 50% retracement of the ‘Brexit move’ in GBP/JPY. On the weekly chart below, we’re looking at this set of retracement levels with emphasis on the half-way point of ¥141.59.
Chart prepared by James Stanley
Since GBP/JPY topped-out in mid-April, sellers have been rather active as the pair has driven-lower by more than 900 pips. There has been quite a bit of headline drama to accompany this situation, as the weakness created from the most recent round of U.K. elections was at least partially offset by a rather hawkish BoE outlay last week. But as we warned, that ‘hawkish’ theme at the BoE was likely transitory in nature; and just yesterday we saw comments from Mark Carney that had essentially ruled out the prospect of a near-term rate hike. This drove GBP/JPY back below the descending trend-line.
This morning produced a peculiar scenario in which the Chief Economist of the Bank of England, Andy Haldane, said that he may be voting for a rate hike in the second half of the year. This speaks to the hawkish tonality from the BoE last week, and this also appears to run contrary to what Mr. Carney had said just yesterday. The net impact of this morning’s comments from Mr. Haldane was a brief run of strength in Sterling; and in GBP/JPY, this brought prices up to resistance at our familiar level of 141.59.
Chart prepared by James Stanley
This can open the door to bearish continuation in GBP/JPY, given one caveat: Traders would need to be comfortable carrying long-Yen exposure or else, they may be able to better-direct those bearish Sterling strategies elsewhere, such as GBP/USD or EUR/GBP. Given that we’ve seen a rather consistent string of Yen-losses after last week’s BoJ meeting, we could be looking at a scenario in which both GBP and JPY lose value; making the prospect of a short position in GBP/JPY rather challenging.
However, for those that are looking to take on long-Yen exposure, short positions could be sought with stops set above today’s swing-high of 141.77 and targets directed to 139.50 and then the prior swing-low of 138.65. For those that would like a bit more room to work, the prior batch of swing-resistance around 142.50 could also be used for stop placement, as well.
Chart prepared by James Stanley
— Written by James Stanley, Strategist 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
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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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