Analys från DailyFX
USD/JPY Trading Near the 106.00 handle as Risk Trends Dominate
Talking Points:
– USD/JPY currently trades near the 106.00 handle after breaking down in Asian trade
– A quiet Monday news flow wise stands in sharp contrast to a week full of key event risk
The USD/JPY currently trades below the 106.00 handle (at the time this report was written) after the pair broke down in Asia trading hours. The move lower appeared to be on the backdrop of a general “risk off” environment following a sharp move lower on Wall Street this past Friday.
A quiet Monday news flow wise stands in sharp contrast to the rest of the week, which includes rate decisions by major central banks, with the FOMC and BoJ in focus for the pair.
Taking this into consideration, we look to find short term trading opportunities using the Grid Sight Index (GSI) indicator.
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The quiet economic calendar today might indicate that focus will be put on risk trends and possibly pre-positioning for key event risk later this week. Indeed, the “anti-risk” Yen status appears to have helped the currency break below the 106.00 handle versus the US Dollar earlier, and rate decisions by the central banks could induce more volatility for the pair. With that said, other event risks, such as the possibility for a “Brexit”, and their affect on risk trends might have amplified implications for the pair while divergent monetary policies appear to play a more complicated role than in the past years.
USD/JPY 5-Min GSI Chart: June 13, 2016
The USD/JPY is testing the big 106.00 level at the time of writing. We can see that the GSI indicator indicates that the pair continued higher by 12 pips in 50% of similar past events (as opposed 21% moves lower by 14 pips). If this is the case again, the pair might attempt to break above and hold the 106.00 level. The GSI indicator calculates the distribution of past event outcomes given certain momentum patterns, and can give you a look at the market in a way that’s never been possible before, analyzing millions of historical prices in real time. By matching events in the past, GSI describes how often the price moved in a certain direction.
You can learn more about the GSI here.
USD/JPY Technical Levels:
Click here for the DailyFX Support Resistance tool
We use volatility measures as a way to better fit our strategy to market conditions. The USD/JPY could see heightened volatility this coming days on major event risks with FOMC and BoJ interest rate decisions down the line. This could imply that breakout type trades are preferable in the short term, as the market may see swings on pre-positioning and large movements in risk assets.
USD/JPY 30-Min Chart: June 13, 2016
The USD/JPY is testing the 106.00 level after breaking lower earlier today.
If the pair manages to hold below the level, this might expose a possible support zone between 105.66 to 105.37, with the 105.00 handle lower.
Levels of interest on a move higher may be 106.255 followed by a resistance zone at about 106.50 and another zone at around 107.20.
When price reaches those levels, short term traders might use the GSI to view how prices reacted in the past given a certain momentum pattern, and see the distribution of historical outcomes in which the price reversed or continued in the same direction.
A common way to use GSI is to help you fade tops and bottoms, and trade breakouts. That’s why traders may want to use the GSI indicator when price reaches those specific pre-determined levels, and fit a strategy that might offer a proper way to define risk.
Meanwhile, the DailyFX Speculative Sentiment Index (SSI) is showing that about 76.6% of FXCM’s traders are long the USD/JPY at the time of writing, suggesting that FXCM’s traders might be trying to pick a bottom in the pair. The SSI is mainly used as a contrarian indicator, implying further weakness ahead.
You can find more info about the DailyFX SSI indicator here
— Written by Oded Shimoni, Junior Currency Analyst for DailyFX.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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