Analys från DailyFX
Trading a Potential False Breakout in CAD/JPY
Talking Points:
- Daily Trend Line Break in CAD/JPY
- Key Resistance Zone for Initiating New Shorts
- The Ideal Time Frame for Taking This Trade
As markets continue to prove choppy, and on the heels of yesterday’s surprising stop-out in CADCHF, this particular trading approach appears to have entered a lower-probability environment. Traders are often spooked by this, as it is possible to have several stop-outs in a row. The ability to move on depends upon having both back-tested and forward-tested the applicable strategy. Regular readers will recall the period in December that was similarly tricky, but also know that January easily yielded a spate of winning trades that more than erased all of December’s drawdowns.
In total, one very important lesson in itself is this: The best response to such trying market conditions is to continue to take trades, albeit cautiously and in strict accordance with one’s own proven trading plan.
Now, as seen below, CADJPY has just broken a declining line of resistance on the daily chart. As always, the first suspicion is that this could be a false breakout, or that it will at least retest the top side of the previous resistance-turned-support. Either way, a move back down in the near future can be anticipated.
Guest Commentary: Daily Trend Line Break in CAD/JPY
On the four-hour chart below, previous horizontal support and resistance suggest a resistance zone of 92.59-93.00. This represents a risk of 41 pips, and possibly less when taking qualifying short positions on an hourly chart.
Guest Commentary: Key Resistance Zone for Selling CAD/JPY
Just from a visual examination of the charts, we see potential for 130 or more pips to the downside, which makes for compelling risk profile. Moreover, the fact that this trade is in line with the daily trend is all the more encouraging.
The hourly chart below has just begun to flirt with the key resistance zone, and fortunately, a false signal in the past two hours may have been avoided. At this point, the ideal scenario would be for price to make a higher high, and then to provide a reversal trigger, such as a pin bar, bearish engulfing pattern, or bearish reversal divergence on the hourly chart.
Guest Commentary: Viable Sell Signals on CAD/JPY Hourly Chart
Two or three attempts can be made to get in on this trade. Overall, however, traders should remain extremely cautious and willing to scalp parts of positions out at the first sign of trouble in order to protect valuable profits. Considering the current state of the markets, defense is the name of the game.
By Kaye Lee, private fund trader and head trader consultant, StraightTalkTrading.com
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
- Crude oil comment: Mixed U.S. data skews bearish – prices respond accordingly
- Crude oil comment: Fundamentals back in focus, with OPEC+ strategy crucial for price direction
- Crude oil comment: Iran’s silence hints at a new geopolitical reality
- Brent resumes after yesterday’s price tumble
- Crude oil comment: A price rise driven by fundamentals
-
Analys från DailyFX9 år ago
EUR/USD Flirts with Monthly Close Under 30 Year Trendline
-
Marknadsnyheter2 år agoUpptäck de bästa verktygen för att analysera Bitcoin!
-
Marknadsnyheter4 år ago
BrainCool AB (publ): erhåller bidrag (grant) om 0,9 MSEK från Vinnova för bolagets projekt inom behandling av covid-19 patienter med hög feber
-
Analys från DailyFX11 år ago
Japanese Yen Breakout or Fakeout? ZAR/JPY May Provide the Answer
-
Analys från DailyFX11 år ago
Price & Time: Key Levels to Watch in the Aftermath of NFP
-
Marknadsnyheter1 år agoDärför föredrar svenska spelare att spela via mobiltelefonen
-
Analys från DailyFX7 år ago
Gold Prices Falter at Resistance: Is the Bullish Run Finished?
-
Nyheter6 år agoTeknisk analys med Martin Hallström och Nils Brobacke