Analys från DailyFX
GBP/USD Technical Analysis: Bullish Reversal Brings post-Election Highs
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Talking Points:
– GBP/USD Technical Strategy: Bearish longer-term trend with near-term bullish reversal.
– GBP/USD has put in a bullish reversal as the Dollar has run down to fresh seven-month lows.
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Over the past week, the British Pound has put in the makings of what looks to be a bullish move on shorter-term charts. After falling to a fresh near-term low of 1.2587 last week, USD-weakness has taken over and Cable has popped-higher, setting a new post-Election high in the process. On the hourly chart below, we’re looking at this bullish move building over the past week after that low was set last Wednesday.
GBP/USD up to Fresh post-Election Highs
Chart prepared by James Stanley
Going along with this move has been a pronounced sell-off in the U.S. Dollar as DXY has sunk to fresh seven-month lows. This has driven many currency pairs up to fresh highs, such as EUR/USD setting a new one-year high water-mark. GBP/USD continues to recover from the post-Election sell-off that took place earlier in June, and with this rally over the past two days, the pair is now trading at fresh post-Election highs.
Chart prepared by James Stanley
In yesterday’s Market Talk article, we looked at a zone of what we had called ‘secondary resistance’ from the levels of 1.2813-1.2830. Each of those levels come from prior price action swing-highs, and this has produced a zone that appears to have caught some near-term resistance. In the midst of yesterday’s Dollar sell-off, we did see some penetration of this zone, albeit briefly, before sellers came-in to offer Cable-lower.
For traders looking at bullish exposure in Cable, under the anticipation that this rout in the U.S. Dollar might continue, they’d likely want to keep risk relatively tight, looking to the daily low of 1.2791 for stop placement on topside strategies. For those looking at bearish reversal strategies in Cable, yesterday’s spike-high could be usable for stop placement, with targets directed towards the daily low of 1.2791 and then the prior area of resistance at 1.2755.
Chart prepared by James Stanley
— Written by James Stanley, Strategist for DailyFX.com
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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
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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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