USDJPY and EURUSD Technical Analysis

USDJPY Free Forex Signals

CURRENCY	BUY FROM	STOP LOSS	TAKE PROFIT	TAKE PROFIT2	TRADE STATUS
USDJPY	112.61	111.55	113.15	116.65	RUNNING

JPY strength, alongside EUR strength, has become the lead story after the Federal Reserve’s Dovish Hike in mid-March. On Wednesday, the Japanese Yen surged to the highest level (which took USD/JPY lower) of 2017, and it’s uncertain what would stop the trend. The low on Thursday morning was 110.63, but there is scope for a move to the 50% retracement of the post-election rally should JPY strength continue, which looks to be developing from the JPY money markets.

Japanese Money markets via, the 3-month JPY LIBOR have risen more aggressively after the Dovish-Hike than USD LIBOR. The decreasing premium has aligned with JPY strength against the USD. While the BoJ is not expected to give the Fed a run for the mosthawkish central bank, a decreasing premium could continue to boost JPY against USD should the trend continue.

The focus should now be on signs of continuation that a breakdown from Bear Channel support may open up a move toward 110/108 on JPY strength, which aligns with the 50, & 61.8% retracement of the post-election price range.

Despite the bearish tone, a trade above 114.48 would show an overlapping price structure that would negate a near-term Bearish view. Until then, we’ll keep an eye for a price break of channel support given the larger environment that may support pending JPY strength and USD weakness.

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Daily

The former level is being tested now and January lows near 112.60 still present a hurdle.” USD/JPY ended up rolling over between 111.60 and 112.60 (high was 112.20). The rally failing in the middle of congestion doesn’t bode well for near term upside but price is still hanging on to a parallel. Failure to gain traction now (above this parallel) opens up 108.55.

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Daily

-Since the start of the year, EUR/USD daily RSI has oscillated between 60 and 40 (nothing above 70 or below 30). This ‘RSI profile’ indicates range conditions. At some point, these range conditions will break and a trend will emerge. When is that ‘some point’? I don’t know but it’s probably soon because this feeling of peak frustration is typical before a sizeable move. Price wise, a short term trendline is being put to the test. If it breaks, then short term focus is towards the year open at 1.0466 and maybe a lot lower given the 3 wave rally from the January low.

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USD/JPY has broken higher by nearly 4% from the April 17 low at 108.13. If you look at the chart below, you can see that the price was already extended lower and a rebound was due. Since then, we’ve had a run higher in specific risky assets like equity and an unwind of bearish EUR positions, which has lifted EUR/JPY higher by ~6.3% in the sametimeframe that USD/JPY has moved higher by ~4%.

Thursday will provide the April Bank of Japan meeting, which is expected to leave rates unchanged and use conservative language on expected inflation has given the stubborn JPY and unsteady commodity prices. The driver for USD/JPY in addition to JPY shorts being pulled off after the first round of the French election is the Tax reform plans announced in the US, which has helped lift the yields as the Federal Reserve is in their quiet period.

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The Euro recoiled from twelve-month down trend resistance against the US Dollar, validating earlier signs of ebbing upside momentum. Confirmation of a larger top implying continuation downward is still pending however as prices test the bounds of the short-term uptrend.

A daily close below trend line support at 1.0934 opens the door for a test of the 23.6% Fibonacci retracement at 1.0862. Alternatively, a break above major resistance at 1.1002 (trend line, 76.4% Fib expansion) paves the way for a challenge of the 100% threshold at 1.1136.

Entering short looks increasingly compelling but risk/reward considerations argue against the trade for now. With that in mind, an entry order to sell EUR/USD at 1.0955 has been set up. If triggered on a bounce, the trade will initially target 1.0826 and have a stop-loss activated on a daily close above 1.1002.

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In fact, traders have remained net-short since Apr 18 when EURUSD traded near 1.06101; price has moved 3.5% higher since then. The number of traders net-long is 6.2% lower than yesterday and 12.5% lower from last week, while the number of traders net-short is 17.7% higher than yesterday and 27.8% higher from last week.

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The Nikkei 225 has made its highs for the year in the past week. Indeed, it is now loitering around peaks not seen since the end of 2015.

From such a lofty peak there’s only one question investors care about, no matter what the asset: can it stay here?
Well, the technical signs are rather mixed as you’d expect. But they’re by no means universally gloomy.
For one thing, the current thrust higher from April 17 has quite convincingly broken a notable down-channel in place since March 13. In the 21 trading sessions since that break the index has managed 13 daily gains and only seven (modest) losses on the way to current highs.

Moreover, the last time the index got up to these levels, it only stayed there for about twelve trading sessions before collapsing in exhaustion. This was back in 2015. This time it has already occupied the heights around 199800 for eight trading days. So, a weekly close around current levels and range trading into next week would be a pretty good sign for those worried that history will repeat itself.

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Retail trader data shows 29.2% of traders are net-long with the ratio of traders short to long at 2.43 to 1. In fact, traders have remained net-short since Apr 18 when EURUSD traded near 1.06101; price has moved 3.5% higher since then. The number of traders net-long is 6.2% lower than yesterday and 12.5% lower from last week, while the number of traders net-short is 17.7% higher than yesterday and 27.8% higher 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. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger EURUSD-bullish contrarian trading bias.

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The CAC 40 and EUR/USD are rebounding this morning, paring losses from earlier this week. This bounce in European markets has come despite Euro-Zone CPI being reported under expectations for the month of May. EUR-Zone CPI (YoY) (May) was expected at 1.5%, but released at an actual 1.4%. With little European news left on the calendar, traders will next be looking to Friday’s U.S. Change in Non-Farm Payrolls (May) to provide direction. Expectations for Friday’s Non-farm Payrolls (May) are currently set at 180k.

The EUR/USD has now risen as much as 119 pips from yesterday’s low of 1.1109.Unlike the CAC 40, the EUR/USD has already broken out above its 10 day EMA which is found at 1.1171. With prices trading higher, traders may next look for the pair to challenge the standing 2017 high at 1.1268. If the EUR/USD is rejected below the yearly high, traders may look for the pair to trade back below its 10 day EMA. In a bearish scenario traders may look for the EUR/USD to then trade to new weekly lows under 1.1109, then potentially push to new monthly lows under 1.0839.

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