Analys från DailyFX
FTSE 100 Popping out of Pattern, Sterling Weakness Helps
What’s inside:
- FTSE 100 breaking higher from inverse head-and-shoulders pattern
- GBPUSD unsurprisingly sporting a bearish HS formation
- Looking for higher prices towards old record highs
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On Wednesday, we were discussing the potential for an inverse head-and-shoulders to come into play, but we needed to first wait for further development before calling it a valid pattern. After a little more back-and-filling the right shoulder of the formation developed and we’re now seeing a push higher well above the neckline.
Based on the depth of the pattern the measured move target aligns with the previous record high of 7354 from January. With the pattern in play the focus will be from the long-side until either the target is met or an invalidation takes place. To nullify the formation we would need to see a hard break below the neckline and a drop below the rising trend-line extending higher from the head. At that point the market may still have legs to move higher, but the integrity of the HS will have been compromised.
Unsurprisingly, with the FTSE and GBPUSD sporting a strongly negative 1-month inverse correlation of -83%, the index and currency are posting mirror image patterns. We’ve been examining the footsie in a bubble, but keep in mind the traditional HS pattern developing on the sterling front. It hasn’t triggered yet, but if it does it will very likely benefit the FTSE 100. The currency is a key driver here, but it also doesn’t hurt too that appetite for stocks, globally, is fairly healthy. The SP 500 just ramped up to new record highs yesterday, the DAX is turning higher, and so have stocks in Japan.
All-in-all, we like the footsie to continue higher as long as it doesn’t turn and take out the pattern from which it just broke free from.
FTSE 100/GBPUSD: 2-hour
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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
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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