Analys från DailyFX
USD/JPY Down Day Largest Since July 2016
Today, USD/JPY finished down nearly 230 pips making it the largest one day sell off since July 2016. My colleague hinted that we might be on the verge of a market upheaval. In times of market duress, JPY strength (and USD/JPY weakness) has been a safe haven play and today USDJPY has lived up to that reputation.
Looking into the Elliott Wave picture the pattern that stands out the most to me is the five wave impulse that began on April 16, 2017 and finished on May 10, 2017.
Since we have a five wave impulse to start a new trend, we can imply a couple things on the current pattern.
First, the April 16, 2017 low of 108.13 likely holds as the current uptrend appears incomplete. Though this sell off has been sharp and aggressive, we will keep an eye out to see if the selling pressure abates. As a result, we will look for a partial retracement of the uptrend and seek out symptoms of a reversal higher. Today’s price action carried to the 61.8% retracement level of the prior uptrend. This price level also coincides with the April 23 high of 110.52. Perhaps a shorter term bottom was found.
In this same price zone is another wave relationship so we may see a bounce to 111.84 over the coming days. If this bounce occurs, the price action near 111.84 will tip the hand as to whether the near term sell off is over and the resumption of the uptrend proceeds or if the downtrend will continue lower.
The second implication of the previous impulse is that after the partial retracement ends, we can anticipate another five wave move higher of similar size. The previous impulse was just over 600 pips. Therefore, after the selloff ends, we will look for another rally of near 600 pips.
The sentiment picture suggests the selloff is not quite over as the current sentiment reading is +1.45 and has been growing. If this sentiment reading continues to increase, then that would signal a shift in sentiment that lines up with the overall Elliott Wave picture. Learn how to trade with sentiment with our IG client sentiment guide.
Do you find USD/JPY movements confusing? Read our Japanese Yen quarterly forecast.
—Written by Jeremy Wagner, CEWA-M
Discuss this market with Jeremy in Monday’s US Opening Bell webinar.
Follow on twitter @JWagnerFXTrader .
Join Jeremy’s distribution list.
Read the recent Gold Elliott Wave article calling for $1260.
Read the recent Dow Jones article and how today’s largest sell off since September fits into the overall Elliott Wave picture.
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
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