Analys från DailyFX
U.S. Dollar Consolidation
- DXY holds consolidation pattern into month / quarter close
- FOMC policy outlook in focus heading into Q4
- Updated targets invalidation levels
It’s the start of a new quarter and despite all the recent Fed rhetoric crossing the wires, it’s important to remain focused on what matters- i.e. price action. Here are the key levels to consider for the DXY as we head into the October open.
DXY Daily
The Dollar Index (DXY) has been trading within the confines of these descending median-lines off the late 2015 high with prices continuing to consolidate off the August highs. Note that volatility is approaching the yearly lows and the last time ATR was this tight was in late-May, right before the June sell-off.
Heading into the start of Q4 we’ll be looking for a break of this consolidation range to offer further guidance on our medium-term directional bias. A downside break of this formation is favored with a break below near-term support aty 94.94 shifting the focus back towards key support at 94.08/17– a region defined by the 61.8% retracement of the August rally and basic trendline support extending off the June lows. A break below this level targets subsequent support objectives at the 2016 low-day close the 2011 trendline support around the 93-handle.
Interim resistance stands at 95.90/99 where slope resistance converges on the 200-day moving average and the September open. A breach / close above the 61.8% retracement at 96.24 (bearish invalidation) would be needed to validate the breakout with such a scenario eyeing the upper parallel backed by 97.23.
Keep in mind heading into the last three-months of the year, expectations are that the Fed will follow a similar path to 2015. That said, Fed Fund Futures are still pricing a 54% chance the committee will raise rates at the December meeting. Hawkish remarks may prop up the dollar over the near-term, but the larger focus is likely to fall on next year’s rotation within the FOMC as central bank officials forecast a lower trajectory for interest rates. In turn, the U.S. dollar stands at risk of facing headwinds over the near to medium-term as Chair Yellen and Co. look poised to further delay the normalization cycle over the policy horizon..
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Relevant Data Releases
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—Written by Michael Boutros, Currency Strategist with DailyFX
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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
—Written by Paul Robinson, Market Analyst
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You can follow Paul on Twitter at@PaulRobinonFX.
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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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