EUR/JPY: Break of Monthly Opening Range to Offer Guidance

2017-08-08 15:30:00 Michael Boutros

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EUR/JPY carving monthly opening range below key slope resistance
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EUR/JPY Daily Chart

Technical Outlook: EUR/JPY has continued to trade within the confines of a well-defined ascending pitchfork formation with prices pressing into resistance at the upper median-line parallel for the past few weeks. Note that the August opening range is now taking shape just below and we’ll be looking for the break to offer further guidance on our medium-term directional bias.

While the broader focus remains higher, the immediate advance remains at risk while below parallel resistance. A breach above the 2016 highs at 132.28 would be needed to fuel the next leg higher in the pair with such a scenario targeting the 61.8% retracement at 134.28. Interim support rests at 128.57- a break there would suggest a larger correction is underway in EUR/JPY.

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EUR/JPY 240min Chart

Notes: A closer look at price action highlights a near-term reversal off slope resistance last week. A newly identified descending pitchfork could be in play here, but it’s too soon to tell. For now, I’ll be looking for a break of near-term trendline support off the 7/19 lows to mark the start of a more meaningful correction in the pair. Interim resistance stands at 130.68/70 with breach above 131.40 needed to validate resumption of the broader uptrend.

From a trading standpoint, the focus remains lower while within this near-term formation with a break lower targeting 129.74 & key confluence support at 128.89. Ultimately, we’ll want to use this pullback to offer more favorable long entries lower down. Event risk is limited on these pairs this week so look for broader market sentiment to drive intraday price action.

A summary of IG Client Sentiment shows traders are net-short EUR/JPY- the ratio stands at -1.66 (37.5% of traders are long) –weak bullishreading
Long positions are 0.6% lower than yesterday but 28.4% higher from last week
Short positions are 3.4% higher than yesterday and 3.4% higher from last week
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EURJPY prices may continue to rise. That said, retail is more net-short than yesterday but less net-short from last week and the combination of current positioning and recent changes gives us a further mixed trading bias from a sentiment standpoint.

What to look for in EUR/JPY retail positioning - Click here to learn more about sentiment!

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