Analys från DailyFX
DAX – Rising Wedge Reaches Maturity, Waiting for the Break
What’s inside:
- DAX trades towards apex of rising wedge
- Waiting for breakout, not predicting direction
- Top and bottom-side scenarios outlined
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In recent commentary, we’ve been tracking the developing rising wedge the DAX has been etching out since late-January. At this juncture, the pattern is considered fully mature, all we need now is a breakout.
Should we see an upside breakout, and if it sustains, then at the least we’ll be targeting the 2015 record highs at 12391. The key words in the last sentence are “if it sustains”; the reason being is that upward breaks on rising wedges (downward, too, but to a lesser degree) are prone to false breakouts. But we won’t worry about that scenario until it happens – we can only run with what is immediately presented to us and demonstrate flexibility when conditions change. With that said, should we see a break above the top-side trend-line and minor resistance in the form of the August trend-line, we’ll run with the long-side. It would be in the event of a break higher, then drop back below the bottom-side t-line of the wedge that we could consider it a false breakout and look to go the other way. Again, we’ll cross that bridge if the time comes.
A close below the bottom trend-line of the wedge and December trend-line would warrant a bearish bias. Sure, like a top-side breakout it could fail and trade higher, but in our experience wedges which break against the trend (especially if it comes with a strong initial burst of momentum), tend to be a ‘surprise’ event and often times lead to powerful moves; the crowd of accumulators throughout the pattern are left holding the bag. It’s worth making mention that the ‘break higher, then fail’ scenario can lead to even sharper declines given the bigger surprise element. A bearish break would have us targeting the bottom of the wedge around 11500.
To start the day, we are treading once again along the bottom of the pattern and the December trend-line. These lines are to be trusted until broken, as we’ve seen for the past month.
DAX: Daily
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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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