Analys från DailyFX
Japanese Yen Breakout or Fakeout? ZAR/JPY May Provide the Answer
An eventful week in Japanese markets should get more interesting in the coming weeks. USDJPY strength is suspect as long as the Nikkei 225 is capped by its May-July trendline. USDZAR completed a near term topping pattern on Friday and objectives are defined.
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USD/JPY and Nikkei 225
Daily
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
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– USDJPY trade since 5/22 may take the form of a triangle, a common continuation pattern. The Nikkei may also be forming a triangle. The USDJPY triangle break was NOT confirmed by the Nikkei break.
– The apex of the triangle (black lines drawn off of highs/lows and red lines drawn off of closes) occurs 9/26, 91 trading days from the 5/22 top. Today was the 72nd day of consolidation, which is more than 75% of the distance from the top to the apex. The risk of a false breakout increases after the 75% point however (Edwards and Magee, Technical Analysis of Stock Trends).
– At turns, the Nikkei 225 (NK) and USDJPY have diverged (failed to confirm price extremes). Both topped on 5/22. At the June low, the USDJPY low wasn’t confirmed by a new NK low. At the July high, the NK high wasn’t confirmed by a new USDJPY high. At the August low, the NK low wasn’t confirmed by a new USDJPY low.
-Friday’s USDJPY slide found low at the topside of former trendline resistance. Daily structure is considered healthy as long as daily close is above 98.80 (prior closing peak).
Strategy – Recovery off of post NFP low in USDJPY is promising. Looking for support on Monday…watch 98.90. Below 98.20 would negate bullish swing potential and shift focus towards 96.70/90.
Daily
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
– EURJPY trade since 5/22 may also take the form of a triangle, a common continuation pattern. The risk of a false breakout due to the proximity of the apex applies to EURJPY in the same manner as USDJPY.
-Triangle support crosses 129.30 next week. The close of the August low day (8/12) is 128.87 is also possible support.
Strategy – Monitor for a breakout / monitor for support from 128.90-129.30. Beware a false break, especially if lower. 127.50 (close of the large range day on 6/13) is possible support below the August low of 127.96.
Weekly
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
-ZARJPY has made important lows at this time of year in recent years. The 2011 low occurred in September. The 2012 low occurred in October. In other words, frequency of lows is roughly 1 year.
-Price is testing the line that extends off of the May and July highs as well as the series of highs from 8/9-8/15.
-Weekly RSI(13) has crossed above 40. A bullish momentum profile is one in which RSI exceeds 70 at price highs and holds above 30 at price lows.
-‘Launch points’ for extended rallies have occurred as double bottoms of sorts in recent years. In 2011, lows were made in September and November. In 2012, lows were made in June and October. This year, lows have been made in June and August (remains to be seen if the August low holds…but off to a good start).
-Getting ahead of ourselves here…but price could be forming a massive inverse head and shoulders pattern (upward sloping as well).
Strategy – Need to see how market handles current resistance before doing anything but you’ll want to keep this one on the watch list.
Weekly
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
– USDZAR traded to its highest level since March 2009 last week before closing near the low for the week.
-Currently testing steep trendline support (in red), a break shifts focus to the former resistance line turned support (in blue).
– Friday’s breakdown completed a head and shoulders top (with a weak right shoulder). Objectives are 9.83 and 9.80 (see below chart).
-Resistance is 10.07-10.10.
Strategy – Looking for a sale in 10.07-10.10 region next week. I would also look to nibble on the long side into 9.75-9.83.
USD/ZAR
4Hour
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
— Written by Jamie Saettele, CMT, Senior Technical Strategist for DailyFX.com
To contact Jamie e-mail jsaettele@dailyfx.com. Follow him on Twitter @JamieSaettele
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.
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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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