Analys från DailyFX
DAX Tech Outlook: Stubbornly Holding On
What’s inside:
- DAX holding on despite trading in French election gap
- Trading at neckline of bearish HS topping formation
- Need a clean break of neckline or alternate scenario could come into view
What will drive the DAX and the Euro for the remainder of Q3? Find out here!
As we were discussing yesterday in regards to the FTSE, global indices aren’t the easiest asset class to get a handle on with volatility at such low levels and market participation thinned out a bit due to summer. But unlike the FTSE, the DAX does present a clearer technical landscape.
The drop to end last week pushed the German index into the gap from the first-round of the French elections, and on Monday it looked like it might be a quick drop to fill the gap down to 12048. While gap-fills are a common occurrence, they don’t always happen in a big rush even when the market has already fallen into the void. Just ask anyone who has been short the CAC; the fill has been elusive and if it is to fill it will have taken a long detour along the way towards reaching its destination.
In addition to a gap-fill, we have an interesting confluence of events which could develop. The DAX is trading just above the neckline of a ‘head-and-shoulders’ top. It slipped ever so slightly below it on Monday, but it wasn’t a convincing break. A convincing break will not only likely lead to a full gap-fill but kick off a larger slide below 12000. (Remember: The neckline must break to validate the HS topping scenario.) Levels to watch on a break lower include 11941, 11850, 11829 (200-day), and the measured move target, derived by subtracting the height of the pattern from the neckline, arrives around 11630.
If the neckline holds, an alternate pattern could come into view – a descending wedge. While this could still have bearish implications, in a bull market they often lead to bullish outcomes. Keep in mind, this is only an alternate scenario and would certainly take some time before becoming a viable possibility.
For now, we’ll see if we can’t get a clean break into the gap and trigger of the neckline. If we don’t soon see a break then a spring higher may develop and we can begin thinking about alternate paths.
DAX: Daily
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—Written by Paul Robinson, Market Analyst
You can receive Paul’s analysis directly via email by signing up here.
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.
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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