Double Top, May Cause A EUR/USD Flop

 | Apr 24, 2017 05:33AM ET

Unnoticed this morning, Euro made a double top, which means USD/JPY may have better value going forward.

We won’t dwell on Macron’s victory yesterday as much has and will be written. The overall effect should be neutral to small bullish on European bonds, stocks and equities as he will not control the legislature after the Parliamentary elections. This will mean compromises and coalitions and almost certainly a policy agenda that will move as fast the French civil service.

Naturally, it has been a risk on day with Asia indices rallying along with Yen crosses. EUR gapped nearly 200 points higher from Friday to trade as high at 1.0907 before spending the day drifting back to 1.0850. USD/JPY gapped higher as well, trading above the 110.00 level as EUR/JPY also gapped.

The reason I keep mentioning gaps is because they’re well, gaps. Have we gaps on charts everywhere thanks to the EUR/USD and USD/JPY jumping in the twilight hours of the morning. EUR/GBP, GBP/JPY, AUD/JPY/ CHF/JPY, EUR/TRY, you pretty much name it. If it has an EUR or a JPY in it has a gap on its charts this morning. Have a look at your one-minute charts, and you will see what I mean. The problem with gaps is that from a technical and purely trading perspective, they usually get filled back in. Particularly ones that happen at the market open at 2 am on a Monday in Singapore.

This is not always the case I must qualify, but it is very often the case. In Euro’s case, the gap is much bigger then JPY’s and potentially more damaging to Euro bulls technically as we shall see. Traders, in fact, may find the USD/JPY and XXX/JPY set-up more intriguing than EUR/USD over the next few days.

EUR/USD

Almost unnoticed this morning, EURO jumped nearly 200 points from the New York close and then spent the rest of the day drifting lower. In the process, it traced out a potential double top at 1.0907. I say potential because it will only be confirmed if we are under 1.0907 at the New York close.

This does bear watching though, especially in the context of my comments on gap filling above. The formation itself also appears to still be an ascending wedge/triangle in a greater downwards trend. This is a bearish consolidation pattern for technicians. Thus the double top could be quite significant if it holds in the bigger picture.

Euro has resistance at the 1.0907 level, but a daily close and consolidations above open the way to 1.1300 in technical terms.

Support lies at 1.0730, then the 100-day moving average at 1.0635 followed by the rising trendline at 1.0610.