Analys från DailyFX
Technical Analysis: Nikkei 225 Bulls Must Show Their Hand Soon
Talking Points
- The Nikkei was in trouble last week, it’s arguably in more now
- The year’s range has broken and a rising trendline is looking more and more vulnerable
- The bulls have an awful lot to do
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I last took a technical look at the Nikkei 225 back on March 11. It was in a spot of trouble. It was also at a point below which it could easily get into a lot more, as further falls would see 2017’s trading range conclusively broken to the downside.
There have been further falls.
In fact, the index now looks rather seriously damaged, at least from a short and medium-term technical perspective.
This is not a pretty picture: Nikkei 2225
Chart Compiled Using TradingView
As you can see the bottom of a rising channel which has been in place since the middle of last year is getting uncomfortably close. It comes it at around 17600 now, with the index itself at 18475 or so.
Then there are those averages. Admittedly the “bullish crossover” which saw the 50-day moving average top its older, 200-day brother back in October – and which heralded a 3000-point bull run – has not been reversed.
But the lines do seem to be converging at this point. Should they continue to do so a bearish crossover would be the result. That in turn would probably put all gains seen since the current rising trend took hold in grave doubt.
In short, the bulls have an awful lot of work to do, with the recapture of 2017’s previous range bases around 18738 probably their first order of business. If they can’t make that then a bearish picture probably gets more so.
PS. There is a caveat to all of the above. It gets a “PS” because it’s nothing to do with technical analysis. The Japanese economic data we’ve seen of late has not been at all bad. Trade reports speak of robust export and import surges. Business and consumer surveys reveal at least relative and, sometimes, absolute confidence.
Moreover, the Nikkei’s current weakness is surely at least in part a global response to geopolitical worries and a disinclination among investors to take undue risk now. After all, a glance at the index compared to – say – the SP 500 shows rather similar performance. Some equity rethink has clearly been in train well beyond Tokyo.
Close enough: Nikkei 225 vs. SP 500
Chart Compiled Using TradingView
But a continued run of optimistic Japanese numbers suggests that there could be scope for the benchmark to regain its old heights, and maybe then some, should that global risk backdrop improve.
— Written by David Cottle, DailyFX Research
Contact and follow David on Twitter: @DavidCottleFX
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.
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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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