Kay Van-Petersen
Kay Van-Petersen, macro strategist at Saxo Capital Markets, digests the market action seen in week 43 and gives his tactical positing. Van-Petersen favours a USD step back, sees gold consolidating, and believes that European equities are overheated.
Medium term
Trade view / 22 September 2016 at 7:58 GMT

Looking for a higher correction in EURJPY

Analyst / PIA First
United Kingdom

USD Index: The US dollar is on the back foot after another Federal Open Market Committee meeting with "a lot of air and no action". Expect intraday volatility as we hold inside the ascending triangle formation. 

I think it will be sometime until we see any sustained trends (in the USD). Resistance is at 95.52, support at 94.70. 

USD Index
Source: Saxo Bank

We have to be mildly more bearish than bullish on the USD in the days ahead. Various national bank speakers going into the end of the week but little in the way of economic data...

The selloff in EURJPY has stalled and is correcting higher this morning. A higher correction offers an opportunity to get short with a good risk/reward ratio (sell into rallies). 

Monthly: A sustained period of consolidation as we hold close to the Fibonacci confluence area (115.36-111.51). Because of the speed of the decline over the last 16 months (over 22%), we look for this to be a mere fourth wave consolidation before the next selloff.  

EURJPY M Source: Saxo Bank 

Weekly: We have rejected gains close to the 23.6% pullback level of 116.65. This is common for fourth waves (Elliott Wave). 

EURJPY W Source: Saxo Bank 

Daily: Highlights the cross breaking the triangle formation to the downside. We have now stalled close to the previous low of 112.46 (August 4). Yesterday we posted a bearish Outside Day.

Although this formation is stronger at the top of the trend, it does highlight investors’ enthusiasm to sell rallies. 

Source: Saxo Bank

Four-hour chart: We have stalled at the 161.8% extension level of 112.24 (from 116.36-113.81). The move higher is regarded as a fourth wave correction (Elliott Wave).

EURJPY 4 Source: Saxo Bank

One-hour chart: The pullback levels for fourth waves are normally 23.6% and 38.2% and these are located at 113.00 and 113.60. With a barrage of bespoke resistance at 113.00, we look to the first level to get short. It should be noted that this is a medium-term trade. 

Source: Saxo Bank

Management and risk description

Risk/reward at 4.7/1.


Entry: 113.00.

Stop: 113.70.

Target: 109.70.

Time horizon: first week of October.

— Edited by Michael McKenna

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Non-independent investment research disclaimer applies. Read more
22 September
AlexF AlexF
Working so far took short at 113.36


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