Trade view /
10 October 2016 at 7:32 GMT
USD index: Volatile trading on Friday resulted in the index posting mild net losses with spikes seen in both directions. We would expect this volatility to continue into this week with rallies sold and dips bought.
Intraday support is seen at 96.22 (breakout level) with bespoke support at 96.27. However, with bearish Outside Bars seen in the six, four, two and one-hour charts (from Fridays high) rallies are likely to find sellers (mixed view).
Source: Saxo Bank
Going to steer clear on the USD today and concentrate on EURJPY.
EURJPY (monthly): Pair sits in a large triangle formation. For the last three months we have consolidated and posted indecisive Inside Months near the Fibonacci confluence areas of 115.36-111.551 (61.8% pullback and 161.8% extension).
EURJPY (weekly): Posted 12 Inside Weeks. Elliott wave dictates that the most common pullback levels for a corrective fourth wave are 23.6% and 38.2% of the third wave. These levels are located at 116.65 and 121.30.
The latter is also close to the corrective channel top.
EURJPY (daily): We have broken out of the corrective channel formation to the upside (blue). A full AB=CD formation takes us to 121.41, just above the 38.2% pullback level.
We have seen some selling from Thursday's high and reverse trendline support is located at 114.49. As long as we hold a daily close above this level, then the bias remains bullish.
EURJPY intraday (four-hour chart): Sellers emerged close to the 261.8% extension level of 116.08 (from 112.06-113.59) and previous swing highs from September 9 and 14. We have channel support and possible right shoulder of a reverse bullish Head and Shoulders pattern at 114.09. The 50% pullback level of the last move higher is seen at 114.16. This is our prime area to get long.
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Source: Saxo Bank
Management and risk description
A move through 116.50 and stop goes to entry.
Entry: buying close to 114.20-114.00.
Stop: hard stop at 113.00 or a daily close below 114.50.
Target: 121.20 (38.2% and AB=CD), approximately 6/1 risk/reward.
Time horizon: three to five weeks.
— Edited by Michael McKenna
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