Analys från DailyFX
Silver Prices Rally into Resistance, Dollar Decider
What’s inside:
- Silver rallying while dollar weakness sets in
- US Dollar Index (DXY) looks poised for more weakness, while silver faces stiff resistance
- Sitting on hands for now, scenarios of interest described
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On Tuesday, we discussed how the inverse correlation remains quite strong between silver prices and the US dollar (21-day = -88%, only up from -96%), while the negative correlation between gold and the dollar has undergone reversion to the mean (21-day = -48%, up from -98%). Silver has clearly demonstrated relative strength versus gold. A sign of caution from the bear-side of the tape we admittedly should have taken more seriously.
The US Dollar Index (DXY) has fallen in recent sessions from a ‘head-and-shoulders’ top (visible on the 4-hr), trading back below the 2015 highs it overcame in mid-November. It has room to go before support is met at the October high at 99.12 (currently trading at 99.89). If the DXY continues to drop towards support, then silver is likely to continue pushing higher, but…
It must take out the low 17s (~17.30/11) resistance area we’ve been talking about for several weeks. A pullback during June and the low in October have created a barrier of significance worth attention. It’s challenging this area now, so if the dollar is to continue lower it looks like we will see silver trade above this pivotal area. Whether it can hold or not is another story. All rallies since the July spike high have been sold quickly after finding a high.
Silver: Daily
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For now, we are left feeling a little stuck here. As a rule, under no condition do we buy resistance, but without seeing a solid rejection of overhead levels we are left without wanting to be short at this time. A spike high and decline back below the low 17s would pique our interest from the short-side, while a solid break above resistance and subsequent hold as support may be of interest for a long trade.
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—Written by Paul Robinson, Market Analyst
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You can follow Paul on Twitter at @PaulRobinonFX.
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.
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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
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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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