Analys från DailyFX
Technical Analysis: Nikkei Slides Into an Uncomfortable Spot
Talking Points:
- The Nikkei’s falls this week have seen it break a modest but still significant uptrend
- So far it has shown very little sign of the impetus to reverse them
- If it can’t, the way down looks rather unguarded
Like many developed-market stock indexes, the Nikkei 225 has spent this year doing – well – not very much of anything. But that could be about to change, and not in a way bulls will like at all.
The index reached a significant intraday top of 19,686 on January 9. That was the peak so far of its long climb from the lows of autumn 2016, when the world was hunkering down for that US presidential election result.
But since January 9, the Nikkei has meandered around that top, providing sufficient peaks and troughs to keep the short-term traders in business but not really moving very far. However, that was until this week when something potentially significant occurred. Tuesday was a miserable day for stocks everywhere as Wall Street swooned. It was certainly poor for the Nikkei. It dropped to its lowest closing point since late February, then did so again on Wednesday.
In the process, it also managed to close below a moderate rising trend line. That line had been in place since January 18, but it gave way when the index slid through 19,178 on Tuesday. The Nikkei went on to close even further below it at 19,117.
It was a modest uptrend, but it’s broken. The Nikkei 225.
The bulls’ primary immediate objective must be to at least recapture that line, which now forms a resistance level at 19,208. However, they don’t seem able to do the deed, or even try very wholeheartedly. The index is now a good way below it at 19,062. That said, all it might take is a sudden Wall Street snap back to put a Nikkei rebound very much in play, but there hasn’t been much sign of that so far.
If the uptrend cannot be re-taken on a closing basis then likely support levels are some way down. They almost must be when rising trend-lines give way. Props will come in at February 7 and 8’s closing low of 11,850, with January 17 and 18’s closures in the 18,729 area lying in wait if those break.
Those will be the levels which bulls must give their all to defend. If they can’t, the way further down will be open.
There’s not much of the year’s first quarter left. How are the DailyFX analysts’ forecasts holding up?
— 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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