Analys från DailyFX
Technical Analysis: Nikkei 225 Perks Up, But Don’t Celebrate Yet
Talking Points:
- The battered Nikkei has picked itself up a little
- Indeed, it is back in a trading range which looked to have been toast
- Still, these are baby steps away from an established downtrend. Caution will pay.
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The last two trading sessions have produced a modest rise in the Nikkei 225, but it’s an important one nevertheless, at least in the short term. For that rise has meant not one but arguably two upside breakouts.
Back in the old range? Nikkei 225 (Futures used for clarity).
In the first and most obvious place the index is now back above the top of a descending channel in place since the recent slide began back in mid-March. Secondly, and perhaps more importantly, the Nikkei’s latest little burst of vigor has put it back within the trading range which dominated much of this year and, indeed, much of the time since November’s climb. That topped out around the 19603 point towards the end of November.
The index didn’t relinquish that range to the downside for nearly five months, not indeed until it slipped through 18785 on April 10. Ever since the market has been nervy and lacked the impetus to get back.
Now it has, if only fleetingly so far.
The trouble is that, while both these signals are encouraging for battered bulls, they are nowhere near conclusive. Such signs of a turnaround remain for the moment blips in a pretty steep downward slide and should probably be viewed with suspicion.
If the Nikkei can re-establish itself more durably above the upper bound of that falling channel then there may be cause for hope that the index is indeed “back”. At present that bound can be seen satisfactorily below current levels at 18855.
But for the next few days discretion while matters develop may truly be the better part of valor.
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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