Analys från DailyFX
We See Key Reasons Why Japanese Yen Might Surge Further
Summary: The Japanese Yen has surged versus the US Dollar, the Euro, and other major counterparts. But why might this be the move we’ve been waiting for?
– Japanese Yen is top-performer versus major forex counterparts in the past two days
– Our retail forex positioning data warns this might be the start of much larger move
– Senior Strategist Kristian Kerr highlights a key cycle turn window in USDJPY
Big moves in the Japanese Yen suggest this may be the start of the larger reversal we’ve watched for, and the next moves in the USDJPY and EURJPY in particular could set the tone for JPY trading through the foreseeable future.
US Dollar Trades below Potentially Pivotal Support versus Japanese Yen
Source: FXCM Trading Station Desktop, Prepared by David Rodriguez
Euro Trades at Similarly Pivotal Support versus the Resurgent Japanese Currency
Source: FXCM Trading Station Desktop, Prepared by David Rodriguez
One critical factor we discussed yesterday was a material shift in retail forex trading sentiment, and our data suggests that the tide may have turned for the EURJPY and other JPY pairs.
Forex Trading Crowds Now at Biggest EURJPY Long Position since Key Turns
Source: FXCM Trading Station Desktop, Prepared by David Rodriguez
What happens next could define Japanese Yen trends through the foreseeable future. And as a long-term JPY bear and US Dollar bull I argued that a USDJPY long position is my favorite trade of 2014. That remains true, but a substantial correction may in fact give me a better opportunity to get long at a lower price.
Indeed one factor very much worth noting is the fact that the recent Yen moves have coincided with a significant jump in volatility prices as seen through FX options markets.
Why is that significant? Put simply, it suggests that many derivatives traders are betting on and/or hedging against big currency moves in the days and weeks ahead.
Forex Volatility Prices Have Jumped as Traders Bet on/Hedge against Currency Moevs
It will be critical to watch price action in the coming weeks as it could determine trends throughout the rest of the year. Follow any updates on the Japanese Yen and other currencies via this author’s e-mail distribution list.
— Written by David Rodriguez, Quantitative Strategist for DailyFX.com David specializes in automated trading strategies. Find out more about our automated sentiment-based strategies on DailyFX PLUS.
Contact and follow David via Twitter: https://twitter.com/DRodriguezFX
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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