Analys från DailyFX
Stalking British Pound Trade and Deciphering Divergent Markets
The GBPUSD is at a point where the opportunistic trader might take advantage of a high price. A Nikkei 225 / SP 500 comparison tells a story that can be played through USDMXN. Divergences between closely related currencies suggest a near term US Dollar turn.
GBPUSD
Weekly
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
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FOREXAnalysis: Bigger picture GBPUSD bearish logic goes something like this; a 4 year triangle was broken to the downside in February. The market found bottom in March and rallied in 3 waves, eventually failing at the February breakdown level. The rally that commenced last week has already erased half (exactly…1.5281 is also the rolling 13 week midpoint) of the decline from the June top. Don’t forget, the high for the year was made on the first trading day of the year (significant when one considers the distribution of highs and lows within a calendar year). Ultimately, the long term triangle break portends a return to 1.3500 although 1.4225/58 is a level to keep in mind as support.
There are concerns of course, including last week’s reversal. The market confirmed the reversal with follow through this week. There are always 2 sides though and the reversal doesn’t erase the implications from the 4 year triangle break. Looking strictly at price, the current level was huge support in 2011 and 2012. A main tenet of technical analysis is that former support becomes resistance and vice versa. Cable is at former support…it’s reasonable to expect resistance.
FOREX Trading Strategy: Currently short from 1.5190 with 1.5310 stop. That stop might not be safe but such is trading. If stopped out then will be looking for resistance near this short term upward sloping trendline.
GBPUSD
Daily
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
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Nikkei 225 and SP 500 Futures Contracts (September)
Daily
Chart Prepared by Jamie Saettele, CMT
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FOREXAnalysis: In just 4 weeks, the SP 500 has levitated to record highs. Juxtaposed next to the Nikkei, there is reason to question the excitement…if not turn outright bearish. The new SP high is not confirmed by Nikkei action. Support becoming resistance and vice versa holds true for trendlines as well. Both markets have traded to the underside of former support lines. It is reasonable to expect resistance here. Market leaders are also flashing warning signs.
FOREX Trading Strategy: Looking to play a stock market reversal through USDMXN. I covered USDJPY at the end of Friday’s DailyFX PLUS webinar.
USDMXN
Daily
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
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FOREXAnalysis: 5/22 is an important day. That is the Nikkei top and it was the SP top. It was also a large volume day across many markets, including USDMXN. The close of that day is estimated support at 12.42. Near term wave structure suggests one final low before a turn.
FOREX Trading Strategy: Looking for a tradeable low next week.
EURUSD and USDCHF
Daily
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
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FOREXAnalysis: Not much to add from the Daily Technicals, but I want to highlight the divergence currently in place. “The USDCHF drop below its 7/11 low creates divergence with the EURUSD, which is in place as long as the EURUSD is below the 7/11 high. It’s also possible that a flat correction is complete from the 7/11 low in EURUSD. The USDCHF turned higher on Wednesday from the 61.8% retracement of the rally from .9129.”
FOREX Trading Strategy: Currently long USDCHF from .9411. Stop .9350. If stopped out then will be looking for turns near EURUSD 1.3270/90 and USDCHF .9290 or .9220.
AUDUSD and NZDUSD
Daily
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
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FOREXAnalysis: I have cited pattern, momentum and sentiment as reasons to look for an AUDUSD reversal in recent weeks but it hasn’t happened so one must consider alternatives. Since June, each tradeable top has been marked by divergence with NZDUSD (NZDUSD exceeds a pivot high and AUDUSD does not). That happened again today and is in place as long as AUDUSD is below .9343.
Markets correct extremes in sentiment and momentum (which go hand in hand) through a combination of time and price. Sometimes more price…sometimes more time. The AUDUSD has corrected almost exclusively through time. Consider that since May 1st, price has declined nearly 14 big figures (1383 pips) from high to low and the largest rally since then has been 340 pips (6/11-6/14). Similar rallies occurred from 5/29-6/3 (263 pips) and 7/12-7/17 (294 pips). Introduce time into the equation and the momentum extremes that were evident through June have moderated. 20 day rate of change is just -.23.
FOREX Trading Strategy:As long as the AUDUSD is below .9343, longs are at risk. I’ll be an observer of this market however. Efforts need to be concentrated on perceived better opportunities (GBPUSD, USDMXN, USDCHF).
— Written by Jamie Saettele, CMT, Senior Technical Strategist for DailyFX.com
To contact Jamie e-mail jsaettele@dailyfx.com. Follow him on Twitter @JamieSaettele
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Jamie is the author of Sentiment in the Forex Market.
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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