Analys från DailyFX
Long US Dollar AND Stocks are both Crowded…and Both at Risk
June is historically the worst month for the stock market. Judging by the last few hours of trading, June apparently came early. A bigger stock market setback probably occurs coincident with a decline in the US Dollar. Why? Long USD and long stocks are both crowded trades. In times of panic, crowded trades get destroyed.
USDOLLAR
Daily
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
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FOREXAnalysis: USDOLLAR technicals have pointed us in the right direction of late. Entering May, we were looking for a broad based USD rally to complete 5 waves up from the September low. The reversal off of the Elliott channel (2 reversals actually…5/23 and 5/29) now warns of lower prices in the weeks ahead. How low? I don’t know but I do know that estimated support is 10655 and 10597. Of interest as well is the top side of the former resistance line that extends off of the 2011 and 2012 highs, and of course channel support that defines the advance from the September low.
FOREX Trading Strategy: Looking for a low between 10597 and 10655…the lower and quicker we get there the better. A fast ‘panicky’ decline, preferably closer to 10597, might be enough to ‘reset’ the market for the next leg higher.
USDJPY
Daily
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
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FOREXAnalysis: The USDJPY rally from 90.84 is an ending diagonal (wedge). Such patterns are usually resolved violently and often fully retraced. Last week’s outside reversal week on a slightly less than record week of volume (CME volume was slightly less than the week that ended 8/17/07) is consistent with an important top. After a pop into 102.50, the USDJPY closed the week lower which qualifies as follow through on the reversal. It’s a good sign for bears that price has separated a bit from the 5/23 close (large range and volume day) of 101.97. Large range and volume days are valuable as pivots (below is bearish and above is bullish). A trendline that extends off of the November 2012 and April 2013 lows is at about 98.40 on Monday and increases about 10 pips per day. The 5/8 low at 98.57 reinforces the area as one of interest. This could be the first support (minor) in a much needed decline. 96.70-97.40 is probably stronger if reached.
FOREX Trading Strategy: Bearish below 102.00 towards 98.50 and 97.00.
AUDUSD
Daily
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
Are you new to FX or curious about your trading IQ?
FOREXAnalysis: The AUDUSD traded to its lowest level since 10/4/2011 on Wednesday before reversing sharply. A long legged key reversal at an important level (the long held AUDUSD target of .9605 has been reached but has never been closed below) after a brutal decline is consistent with at least a near term low. From an Elliott perspective, a rally would probably compose a 4th wave and could carry back to .9841 before the next top forms. The circled area on the chart highlights the December 2010 low and day of the October 2011 low.
FOREXTrading Strategy: Above .9700 is needed in order to trade on the long side into .9840. I’m looking for resistance into .9840/80. The underside of the line that extends off of the 2011 and 2012 lows is at about .9880 next week.
GBPUSD
Daily
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
Are you new to FX or curious about your trading IQ?
FOREXAnalysis: 5 waves are evident from the May GBPUSD high. The implications are for a correction of that decline before the next bear leg. The most likely stopping point for the advance is 1.5322/77 (former 4th wave and 61.8% retracement). Near term support is 1.5127.
FOREXTrading Strategy: Evidence (outside day reversal at an important level and a mature wave pattern) suggests we look higher but probably into a top that will be sold in to. Support is estimated at 1.5127 and resistance at 1.5322/77. Breakout systems will be of use after this next advance.
— Written by Jamie Saettele, CMT, Senior Technical Strategist for DailyFX.com
To contact Jamie e-mail jsaettele@dailyfx.com. Follow him on Twitter @JamieSaettele
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Jamie is the author of Sentiment in the Forex Market.
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
—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.
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
To be added to Christopher’s e-mail distribution list, please fill out this form
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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