Analys från DailyFX
EUR/USD Caught Between a Rock and a Trend-line; FOMC Looms
What’s inside:
- EURUSD remains capped by the 2012 low
- April trend-line and ~10825 keep the euro supported
- Back-and-forth price action may unfold before seeing a resolution; FOMC on Wednesday
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In last week’s forecast, we were looking at the possibility of EURUSD putting in a rising wedge on further deterioration in upward momentum at key long-term levels. However, that would have required another attempt this past week to etch out higher prices after a modest pullback. While the pullback to the start the week was modest, it broke what would have been the underside of the wedge and found support around 10825.
We are currently left stuck between solid points of support and resistance. On the top-side we have strong long-term resistance by way of the 2012 low (two reversal days – 8/29 9/8 – as evidence of sellers), while on the bottom-side lies the trend-line rising up from April in confluence with support around 10825. On the 4-hr we broke one degree of trend support and retested it on Friday, but the more important line of support is on the daily time-frame.
The trend since earlier in the year is still very much intact, and so we must respect that. But without a surge of buyers it appears it will be difficult to push on through to new levels. If we can get a clean close above recent peaks then our focus will turn towards resistance by way of the June 2010 monthly closing print at 12236. If, however, a break of the April trend-line and 10825-area can develop then we look for a broader decline to unfold. There is always the possibility of a bearish ‘head-and-shoulders’ (HS) formation, which if it does form will also require a break of neckline support around 11825.
It’s quite possible we are in for a tug of war this coming week between bottom and top side levels before making a clean directional move. The reaction to the FOMC meeting on Wednesday may dictate which way the euro heads for the foreseeable future.
EURUSD: Daily
4-hr
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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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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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