Analys från DailyFX
GBP/USD Technical Analysis: Bullish Break of Bull Flag Formation
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Talking Points:
– GBP/USD Technical Strategy: Mixed longer-term, bullish short-term.
– GBP/USD has posed a topside break of a bull flag formation.
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In our last article, we looked at the prospect of bullish continuation in GBP/USD. After the pair put in a very strong move in the latter portion of June, the stage was set for continuation, and in our last article we looked at a zone of potential support to trade such a theme that ran from 1.2809 up to 1.2861. With an apparent shift taking place within the Bank of England’s MPC, and with an extremely weak U.S. Dollar, there were quite a few reasons for so much interest to draw around the trade.
As we turned the page into Q3 at the beginning of July, profit taking had started in Cable and the pair spent most of the first part of the month trending-lower within a downward sloping channel. This created a bull flag formation as recent gains were digested in a rather formulaic fashion, and prices remained in that channel for much of the period until support came-in at the bottom of our zone at 1.2809.
GBP/USD Hourly Chart: Bull Flag with Bullish Break
Chart prepared by James Stanley
After buyers took over following that test of 1.2809, the pair has begun to show bullish price action as prices have driven-above the downward sloping channel, giving us a topside break of the bull flag formation. This can open the door to long exposure, and on the chart below, we’re looking at three nearby support levels that buyers can use to base topside approaches. Each of these levels can be used for potential support, or perhaps even stop placement for those that would like to manage their risk a bit more aggressively. A red box has been placed over the low around 1.2809, and if prices break below this level, the bullish approach is nullified.
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.
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
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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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