Analys från DailyFX
3 Good Reasons to Buy CAD/CHF
The daily chart of CADCHF shows a bullish hammer-style candle, a potential double-bottom pattern, and bullish Stochastic signal, all of which indicate a tradable price reversal ahead.
Looking at a recent daily chart of CADCHF, we can see that there are a number of interesting things happening, not the least of which is the pure price action alone, which signals a possible bullish reversal ahead.
On August 27, price printed a low of 0.8722, which was a well-defined support level. Then, on October 1, a higher low of 0.8735 was put in, thus forming a double-bottom pattern on the chart.
The daily chart also printed a hammer-style candle, although, technically speaking, it’s a “spinning top.” By either name, however, it is a price-action signal that lower prices are potentially being rejected. It is also a sign of market indecision.
See related: The Most Important Price Action Formation: Indecision
Finally, we can see that the lower low was made on August 27 while the Stochastic directly below the price was above the zero line. Now, however, we can see that the Stochastic below the higher low is actually still pointing slightly down and appears to be crossing below the zero line, thus showing a bullish divergence.
Guest Commentary: Bullish Reversal Set-up in CAD/CHF
When we put all of these items together, we arrive at a conclusion that CADCHF is potentially ready to turn to the upside. These are the facts:
- Price is at a clear support level (0.8720)
- Price action is showing indecision
- There is a double-bottom pattern with a higher low
- Bullish divergence is confirmed by Stochastic oscillator
How to Trade This CAD/CHF Set-up
The most common method for trading this set-up would be to take the break of the recent high, which was 0.8792, and add about 10 pips. A stop level can then be determined by taking the lower low from August 27, which was 0.8722, and subtracting 10 pips to get a stop-loss value of 0.8712.
Price targets can be determined in many ways, but the most common would be to look for a 1:1 move, which, in this case, takes us up to 0.8872. That makes sense considering we have lows from June in that area that are acting as resistance.
Secondary targets can be set by figuring 2:1, 3:1, etc., or by using key support/resistance levels such as 0.9040, around which price has previously made highs, lows, and/or consolidated.
See also: The Hammer Trigger for Bullish Reversals
By Colin Jessup, Guest Contributor, DailyFX.com
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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