Analys från DailyFX
USD/CAD Bounces from 1.24 Target Yet Bullish Pattern Appears Incomplete
USD/CAD has quietly rallied 300 pips since forming a medium term low at 1.2413 on July 26. The next day we wrote how “a counter trend bounce may be in the early stages higher…the depth and shape of the bounce will alert us if the [previous] downtrend is over or if it is merely taking a breather. It would be considered normal for the bounce higher to work back towards the 1.28 handle.”
The current bounce higher has worked up to 1.2746. We do not have enough evidence to say for sure at this time if the downtrend ended at 1.2413, but the clues are leaning towards still higher prices.
The Elliott Wave model we are following counts an impulsive wave in the works off the low. This is a key pattern. As I have mentioned many times before, there are two Elliott Wave patterns that begin with an impulse wave and both of them are followed with at least another wave of similar size. This narrows our field of vision to anticipate yet higher prices after a partial retracement lower.
Therefore, once this current impulse wave higher exhausts, we will anticipate a partial retracement lower to above 1.2413. We will use Fibonacci retracement levels and corrective wave estimates like equal wave patterns to estimate entry points. This price forecast remains valid so long as we are above 1.2413.
We are beginning to see patterns of US Dollar strength emerge. USDCAD is one of those markets where we are anticipating more USD strength. We also recently wrote about the patterns in USD/CHF and USD/NOK as US Dollar strong moves.
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EURUSD finds support at the former resistance level.
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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
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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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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
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