Analys från DailyFX
Technical Analysis: Nikkei Looks Tired; Does Range-Bottom Beckon?
Talking Points:
- The Nikkei has held in a 1000-point range for much of this year
- There’ve been more upside tests than forays to the downside
- But we are uncomfortably near the middle now
Perhaps you’re familiar with the tale of the tourist asking directions in rural Ireland only to be told by a local, “well, to be honest, I wouldn’t start from here.” Trying to predict the Nikkei 225’s near-term direction from a technical perspective right now will give you a sense of how that tourist must have felt.
Because of course, like that traveler, we must start from here. But “here,” in Nikkei terms, is just about bang in the middle of a trading range which has held since December 8, 2016. So, from current levels that range offers us just about as much upside potential as downside. Very helpful.
The Japanese equity benchmark has been fluctuating in a wide, 1000-point-or-so band ever since it pushed up through the current range base – 18638 – on that date. The top of the range is the peak of the long climb up from November’s lows, hit in early January. There’ve now been five attempts at that top (19700). They’ve all failed but, by the same token, the range base has also gone unthreatened.
Bulls might point out that the index has spent most of the period in question quite well above current levels. Bears might counter that the trendline break we saw to the downside last week has not been rejected, even if the index remains maddeningly within striking distance of undoing that damage.
What we can say is that if those bulls are going to regain lost momentum they had probably better do it soon. If the index can’t close materially higher than it is now, then the recent closing low, last Wednesday’s 19040 will come back into play.
If that too were to fail we might be looking at a test lower, even if that range bottom is not yet seriously threatened. Clear support to the downside is scant though. The closing level of February 6 and 7 at 18849, and the close of January 17 and 18 at 18725 are likely candidates, but they are both some way below where the index is now.
Stuck in the middle with the Nikkei
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— 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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