Analys från DailyFX
DAX & CAC 40 Have Major Hurdles to Overcome as ECB Comes & Goes
What’s inside:
- ECB outcome resulted in euro strength and small pressure on European equities
- DAX remains capped below 12300 on a closing basis, very important threshold for outlook
- CAC 40 is also having its struggles as it remains trapped in a bearish channel
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Yesterday, the ECB met and the resulting strength in the euro did no favors for major European equity markets. Both the DAX and CAC were unable to climb to climb above significant resistance levels. Actually, at one point the German index traded to its best levels since July 21, but on a closing basis (which is what really matters) it failed and put in a small reversal bar. We’ve been discussing the area around 12300 for a good amount of time now, as it continues to be a headwind for the longs. Stay below and the outlook continues to be neutral to bearish. With a clean close into the mid-12300s and move above yesterday’s high at 12363 and our tune will change.
DAX: Daily
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Since the election outcome in France the CAC 40 has grinded its way lower in a tight bearish channel with euro strength putting pressure on the market. It’s been a long, slow grind for sure. Towards the very end of last month, the market dropped to the low-end of the channel where a retest took place of the trend-line running down off the 2000 highs over the 2007 and 2015 peaks. Yesterday, the CAC turned lower from the top of the channel and as long as it remains in its confines, then like the DAX the outlook remains neutral to bearish. A clean break above will likely coincide very closely with a breakout above 12300 in the German index, at which time focus can shift higher.
CAC 40: Daily
—Written by Paul Robinson, Market Analyst
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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
You can receive Paul’s analysis directly via email bysigning up here.
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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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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