Analys från DailyFX
Two Triangles, One AUD/JPY Trade
Talking Points:
- Triangle Consolidation on AUD/JPY Weekly Chart
- The Triangle within a Triangle on Daily Chart
- Risk-Controlled Long Set-up from Strong Support
AUDJPY likely has many intraday traders spooked after its recent run to the down side. However, a look at the bigger picture offers a more interesting possibility where the pair may put in at least a short-term low in the near future.
Although the weekly chart below does not currently offer much in terms of trend direction that is relevant to intraday trades, it at least reveals a longer-term triangle consolidation area.
Guest Commentary: Triangle Consolidation on AUD/JPY Weekly Chart
Thus, on the daily chart, more choppiness can be expected, but this also lends credence to the notion of applying a range-type strategy to engage with price.
The daily chart below sports a smaller triangle within the larger one. Price has just broken the support of this daily triangle and now looks poised to head further down. However, before it does, it is reasonable to expect a retest of the trend line resistance.
Guest Commentary: Triangle within a Triangle for AUD/JPY
Although this may look small, it represents an 80-pip move. And, if the breakout turns out to be false, there are 200 pips until next resistance. Although those numbers make trading this on the daily chart unattractive, an intraday set-up would likely prove adequate.
The normal procedure would be to head down to a lower time frame to identify support or resistance, but in this case, the horizontal levels actually stretch far enough back that they are more clearly visible when zooming out on the daily chart, as shown below.
Guest Commentary: Previous Support/Resistance for AUD/JPY
Analysis suggests that the best area of support is 90.97-91.59. This zone represents an approximate 62 pips of risk, which makes the trade more attractive from an overall risk/reward standpoint.
The four-hour chart below shows the strong recent down move that likely scared many buyers out of the market. Due to the extreme momentum and lack of evidence of strong buying, this represents a considerable risk to those using it to trigger an entry. Instead, it would be wiser to either, 1) enter earlier, before four-hourly buyers take action; or 2) enter later, after a genuine move up has been confirmed.
Guest Commentary: Strong Intraday Down Move in AUD/JPY
For the purposes of intraday trading, the earlier entry presents a more valid option, as it allows for nimble trade management and scaling out if conditions prove unfavorable. It may take two or three tries to get this trade right, but the prize for those who are successful will be an early entry.
Thus, the hourly chart is the viable entry time frame, and bullish reversal divergence, bullish pin bars, and/or bullish engulfing patterns will be viable trade triggers.
With luck, this will prove to be a false breakout of the daily triangle, and price will then reverse quickly to the upside. If it doesn’t, however, there will be another trade if/when price does retest the underside of the triangle from which it has just broken out.
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
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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.
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
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