Analys från DailyFX
Price & Time: USD/JPY and the Importance of the 200-day Moving Average
Talking Points
- USD/JPY testing major support zone
- Kiwi looks to be nearing a minor top
- SP 500 cycle turn window late this week
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Focus Chart of the Day: USD/JPY
USD/JPY touched its 200-day moving average on Tuesday. It is the first time the exchange rate has tested this widely watched support level since November of last year. More importantly it is the first time the rate has tested the 200-day at all since it began its meteoric rise last year. In our view, the odds greatly favor some sort of recovery in the next few days as first time tests of the widely watched moving average after prolonged periods above are usually successful in generating some sort of bounce. Why? Who knows. We suspect it is because a prolonged period above the 200-day moving average suggests a very strong uptrend while the 200-day MA is a finite level that even non-technical traders can sympathize with. Orders thus tend to congregate around it (this behavior is especially prevalent in individual stocks). Obviously a market can cut through its 200-day MA without stalling but this is much more the exception than the rule. Be on the lookout for a USD/JPY snapback.
Foreign Exchange Price Time at a Glance:
Price Time Analysis: EUR/USD
Charts Created using Marketscope – Prepared by Kristian Kerr
- EUR/USD has come under modest pressure over the past few days
- Our near-term trend bias is higher in the single currency while above 1.3475
- The 8th square root projection of the year’s low at 1.3655 is a major upside attraction
- The second half of the week is a minor turn window
- Only a daily close below the 2nd square root progression of the year’s high at 1.3475 would undermine the near-term positive tone in EUR/USD
EUR/USD Strategy: Reduced longs favored while above 1.3475.
Price Time Analysis: NZD/USD
Charts Created using Marketscope – Prepared by Kristian Kerr
- NZD/USD remains trapped in a sideways to higher range below the 1st square root progression of the September high near .8340
- Our near-term trend bias remans lower in the Bird while below this level on a daily close basis
- Under .8250 is really needed to re-invigorate downside prospects in the Kiwi
- Today is a clear cycle turn window and we are loking for some sort of peak
- A daily close over .8340 would re-focus our attention higher
NZD/USD Strategy: We like selling the Kiwi into strength during this turn window.
Price Time Analysis: SP 500
Charts Created using Marketscope – Prepared by Kristian Kerr
- SP 500 broke under the 50% retracement of the August to September advance in the 1680 area last week
- Our near-term trend bias is now lower in the index as a result
- The 61.8% of the August to September move higher at 1667 is now a level of focus with a move below likely needed the prompt more material weakness
- The end of the week is a potentially important cycle turn window for the index
- Back over 1700 is required to shift the near-term trend bias back to positive
SP 500 Strategy: Looking to sell on strength.
— Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com
This publication attempts to further explore the concept that mass movements of human psychology, as represented by the financial markets, are subject to the mathematical laws of nature and through the use of various geometric, arithmetic, statistical and cyclical techniques a better understanding of markets and their corresponding movements can be achieved
Looking for a way to pinpoint sentiment extremes in real time? Try the Speculative Sentiment Index.
To contact Kristian, e-mail kkerr@fxcm.com. Follow me on Twitter @KKerrFX
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
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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