The team at Nomura is examining the technical levels for both EUR/USD and USD/JPY and is identifying interesting patterns.
And for both pairs, the dollar could be on the downside:
Here is their view, courtesy of eFXnews:
The right shoulder idea in EUR/USD proved wrong because prices did not break the key neckline at 1.2578 and the move back to the Nov lows negated the pattern, notes Nomura
As such, Nomura now thinks that the only bright spot for its technical outlook for a longer-term upward correction is a possible double bottom forming at 1.2358.
“S/t, resistance is 1.2444 (the picot lows from last week). A break through last weeks pivots will encourage a test of the October downtrend line but there is a lot of work to do to form a second bottom,†Nomura argues.
“Critical support is much closer at 1.2358 and a break leaves little support down to a long-term uptrend at 1.2262,†Nomura adds.
In USD/JPY, Nomura thinks that the bearish shooting star on last Thursday (confirmed with Friday’s decline) and the fact that the wave-3 rally was 1.618 the duration of wave-1 supports the idea of a tradable top in place.
To confirm this pattern, Nomura argues that we still need more evidence that a wave-3 top is in and that would come via a move below 117.41 support.Â
“S/t, key downside levels have so far held with the first being 117.41 pullback support. Old pivot highs at 117.05 is the next key hurdle to clear a path for a deeper decline and then 115.46 is critical pivot support. The uptrend from October has yielded and the next level to watch this week is 117.41,†Nomura projects.
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