Analys från DailyFX
FTSE 100 – Big Support Break on Hawkish BoE, Strong Sterling
What’s inside:
- Hawkish BoE breaks the FTSE 100, rips sterling
- A clean drop beneath 7300 clears a path towards 7100/50
- Will take a reversal back above support to pause outlook
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On Wednesday, we took a look at the FTSE 100 ahead of yesterday’s BoE meeting, making note of the month-long trading range. Will the BoE break the range, we asked. Confidence in that happening wasn’t particularly high, but we recognized it as certainly a possibility. As we are seeing now it is becoming reality, with a hawkish BoE giving further life to an already strong sterling and sending shares reeling. We closed yesterday just below the very important 7300-mark, but just above the lowest point of the range created on 8/29 at 7289. So, if today the index can sustain trade where it is or worse, that will make for a confident break.
Not only will thoroughly tested horizontal support have been cleanly broken, but the double-top will be triggered with an official break of the neckline, along with saying goodbye to the 200-day moving average. The February 2016 trend-line is long gone with yesterday’s sell-off. This sets the index up for a move towards the area right around 7100, which has pretty good support, but between here and there we are left with room to operate from the short-side. The measured-move target derived by the height of the double-top formation points to a move to around 7050.
There is a lot of time between now and the close of trade today, and should we see a reversal back above our big threshold of support, then we will need to put the brakes on shorts. It won’t turn the outlook bullish, but will require waiting for the clean break before sharpening the knives. The FTSE heading lower would certainly be contra to our outlook for other major indices – DAX, CAC 40, SP 500 – but these markets aren’t joined at the hip and can go do their own thing.
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FTSE 100: Daily
—Written by Paul Robinson, Market Analyst
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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.
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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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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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