Analys från DailyFX
USD/CAD Downtrend Still Eyeing 1.24 Target
Since May 8, we have been anticipating a top in place for USD/CAD that may drive the pair towards 1.24. We have not reached 1.24 yet and on Wednesday, Bank of Canada releases their latest round of monetary policy with the expectation of a rate hike. The consensus is for a 25 basis point hike so the weakness in USD/CAD is likely baked into the rate already. (Join David Song here for live coverage and analysis of the rate announcement.)
The longer term Elliott Wave model we are following suggests the downtrend still has room to run. However, the near term trend is becoming exhausted and the possibility of a bounce higher is elevated.
The image below is the longer term model and suggests the pair is correcting lower in (A)-(B)-(C) fashion. Typically, wave (C) has an equal or Fibonacci relationship to wave (A). The first such wave relationship arrives near 1.24 which is also where an upward sloping trend line rests. Therefore, we are anticipating a battle to be fought near 1.24.
Zooming in to an intraday chart, the shorter term Elliott Wave model suggests the current downtrend is maturing and is ripe for a bounce. As labeled, the model shows a completed impulse wave that implies the pair may move into corrective mode higher.
First, it appears wave (v) was an extended wave as it currently rests near 1.618 the length of waves (i) through (iii). Secondly, we can see evidence of RSI divergence that is consistent with the current positioning in the wave count.
Sentiment paints a picture of a possible correction as well. The number of net bearish traders has increased 17% over yesterday and increased 35% over last week. We want to use that as a contrarian signal, which suggests a bounce higher may be on the horizon. Learn how to trade with sentiment with our IG client sentiment guide.
If a bounce begins, a typical and common retracement level may drive up towards 1.32-1.35. Keep in mind, though we are anticipating a bounce, the trend remains down. We encourage traders not to fight the trend, as it is like swimming upstream. The 1.32-1.35 area if reached, may offer traders an opportunity to position to the short side.
Interested in learning more about Elliott Wave Theory? I will be conducting a live webinar on impulse waves later today. (Free registration)
If you prefer hard copy resources, grab the beginner and advanced Elliott Wave guides.
—Written by Jeremy Wagner, CEWA-M
Discuss this market with Jeremy in Monday’s US Opening Bell webinar.
Follow on twitter @JWagnerFXTrader .
Join Jeremy’s distribution list.
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
Confidence is essential to successful trading, see this new guide – ’Building Confidence in Trading’.
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.
Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.
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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