Analys från DailyFX
Systems Sell Yen Post-BOJ, Buy Euro Post-ECB. Be Careful Out There
Our sentiment-based strategies have seen a dramatic turn of fortunes as post-ECB and Bank of Japan volatility. Trading conditions are difficult, but fresh Japanese Yen shorts look promising.
View individual currency sections:
EURUSD – Euro Choppiness is Out of Control – Let’s Wait for a Break
GBPUSD – British Pound Whipsaws Us Out of Short Positions – Now What?
USDJPY – Japanese Yen Does Nasty Head-Fake, Looks Bearish Post-BoJ
XAUUSD – Gold Selling Off – Watch out Below if we Clear $1529
SPX500 – SPX500 Shows Signs of Turn, But We Aren’t Selling Yet
AUDUSD – Australian Dollar Chops us Out – Standing Pat Until it Breaks
Weekly Summary of Forex Trader Sentiment and Changes in Positioning
It’s been a difficult 24 hours for our trend-following Momentum2 and volatility-friendly Breakout2 trading strategies, as extreme market choppiness on the Bank of Japan and European Central Bank interest rate decisions has made both systems flip direction across US Dollar and Japanese Yen currency pairs. No trading technique is without its flaws, and we’ll readily admit that our sentiment-based trading strategies tend to do poorly in choppy market conditions.
There are early signs of significant turnaround in the Japanese Yen and potentially an upside break in the Euro, and indeed our Momentum2 system has now gone long EURJPY (as well as USDJPY, AUDJPY, and CHFJPY. The severity of the reversal suggests these could be good trades, and in fact the EURJPY position itself is already over 200 pips to the good.
Yet we must emphasize that market conditions remain challenging; if you were fortunate to have automated the “Momentum2” trading system on the JPY pairs ahead of the surge, keep stops tight. If you weren’t, keep leverage low on any subsequent trades given extreme market indecision.
Download eight years’ worth of SSI data via this link.
View how to automate the high-volatility Breakout2 Trading System via our previous article and webinar recording.
Auto trade the trend reversal-trading Momentum2system via our previous article and webinar recording.
Trade with strong trends via our Momentum1 Trading System and view an archived webinar
Use our counter-trend Range2 Trading system and view an archived webinar guide on automation
— Written by David Rodriguez, Quantitative 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
Confidence is essential to successful trading, see this new guide – ’Building Confidence in Trading’.
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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