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A GBP/AUD Reversal with Room to Run

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More hawkish bias from the RBA last night initiated what looks to be a double-top reversal pattern in GBPAUD, which is overextended to the upside and may now be a prime target for a short trade.

GBPAUD can be a tough pair to trade, as it is prone to very large, very violent moves. In fact, the pair is up by nearly 3,000 pips since April alone! Right now, though, the chart for GBPAUD looks to be setting up a very nice reversal pattern.

This week’s rejection of the 1.74 level following the Reserve Bank of Australia (RBA) rate decision may have created a double-top reversal pattern in GBPAUD, the neckline of which sits at roughly 1.6860. From here, a break of that 1.6860 neckline would open up a move down to about 1.62, where the 200-day exponential moving average (EMA) currently sits.

Right now, the GBPAUD pair is trading in a well-defined range between 1.6860 and 1.74, and brave range traders could try to short the pair here, targeting the bottom of that range.

More conservative range traders could try buying GBPAUD at 1.6860, but my favorite strategy would be to sell a break of the range.

Guest Commentary: Double-Top Reversal Pattern in GBP/AUD

A_GBPAUD_Reversal_with_Room_to_Run_body_GuestCommentary_LMcMahon_October1A.png, A GBP/AUD Reversal with Room to Run

The neutrality of the recent RBA statement is going to clear some upside room for the Australian dollar (AUD), in my opinion, as fears of verbal intervention or another rate cut fade. This Aussie upside offers a great deal of GBPAUD downside, as the pair is overstretched after a significant run higher this year. This potential double top offers a great opportunity for the pair to retrace some of its gains and rest a bit before likely pushing higher to end the year.

By Liam McMahon, Currency Strategist, GlobalFxClub.com

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EURUSD Weekly Technical Analysis: New Month, More Weakness

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What’s inside:

  • EURUSD broke the ‘neckline’ of a bearish ‘head-and-shoulders’ pattern, April trend-line
  • Resistance in vicinity of 11825/80 likely to keep a lid on further strength
  • Targeting the low to mid-11600s with more selling

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Coming into last week we pointed out the likelihood of finally seeing a resolution of the range EURUSD had been stuck in for the past few weeks, and one of the outcomes we made note of as a possibility was for the triggering of a ’head-and-shoulders’ pattern. Indeed, we saw a break of the ’neckline’ along with a drop below the April trend-line. This led to decent selling before a minor bounce took shape during the latter part of last week.

Looking ahead to next week the euro is set up for further losses as the path of least resistance has turned lower. Looking to a capper on any further strength there is resistance in the 11825-11880 area (old support becomes new resistance). As long as the euro stays below this area a downward bias will remain firmly intact.

Looking lower towards support eyes will be on the August low at 11662 and the 2016 high of 11616, of which the latter just happens to align almost precisely with the measured move target of the ‘head-and-shoulders’ pattern (determined by subtracting the height of the pattern from the neckline).

Bottom line: Shorts look set to have the upperhand as a fresh month gets underway as long as the euro remains capped by resistance. On weakness, we’ll be watching how the euro responds to a drop into support levels.

For a longer-term outlook on EURUSD, check out the just released Q4 Forecast.

EURUSD: Daily

EURUSD Weekly Technical Analysis: New Month, More Weakness

—Written by Paul Robinson, Market Analyst

You can receive Paul’s analysis directly via email bysigning up here.

You can follow Paul on Twitter at@PaulRobinonFX.

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Euro Bias Mixed Heading into October, Q4’17

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Euro Bias Mixed Heading into October, Q4'17

Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.

EURUSD: Retail trader data shows 37.3% of traders are net-long with the ratio of traders short to long at 1.68 to 1. In fact, traders have remained net-short since Apr 18 when EURUSD traded near 1.07831; price has moved 9.6% higher since then. The number of traders net-long is 15.4% lower than yesterday and 16.4% higher from last week, while the number of traders net-short is 0.4% higher than yesterday and 10.5% lower 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. Positioning is more net-short than yesterday but less net-short from last week. The combination of current sentiment and recent changes gives us a further mixed EURUSD trading bias.

— Written by Christopher Vecchio, CFA, Senior Currency Strategist

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

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British Pound Reversal Potential Persists Heading into New Quarter

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British Pound Reversal Potential Persists Heading into New Quarter

Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.

GBPUSD: Retail trader data shows 38.2% of traders are net-long with the ratio of traders short to long at 1.62 to 1. In fact, traders have remained net-short since Sep 05 when GBPUSD traded near 1.29615; price has moved 3.4% higher since then. The number of traders net-long is 0.1% higher than yesterday and 13.4% higher from last week, while the number of traders net-short is 10.6% lower than yesterday and 18.3% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBPUSD prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current GBPUSD price trend may soon reverse lower despite the fact traders remain net-short.

— Written by Christopher Vecchio, CFA, Senior Currency Strategist

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

To be added to Christopher’s e-mail distribution list, please fill out this form

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