Analys från DailyFX
The Potential "Awakening" of EUR/CHF
Talking Points:
- Textbook Symmetrical Triangle in EUR/CHF
- Daily Chart Favors Upside Breakout
- Key Support Zone for Initiating New Longs
The GBPAUD trade we discussed yesterday worked like a charm, and the results can be seen here on the Straight Talk Trading Blog.
Today, the attention turns to EURCHF, which is famous for the fact that from time to time, intervention will force the pair toward certain levels. A look at the weekly chart below confirms the declining interest of traders as it forms a nearly perfect symmetrical triangle pattern.
Guest Commentary: Classic Symmetrical Triangle in EUR/CHF
As always, all consolidating markets must eventually break out, and we are in the final third of the triangle as price winds towards the termination point. Of course, some triangles simply develop into more elongated sideways patterns, but a breakout at this point would be very significant.
In the meantime, traders can keep entering smaller-time-frame trades, hoping to ride it into a bigger trend.
The daily chart presents a triangle within a triangle. All this consolidation will break out at some point, and the question is whether to back the bounce or the break. There are arguments both ways, but the strongest argument would be that the most recent price action prior to the triangle was bullish, so a bounce seems like the more likely scenario.
Guest Commentary: EUR/CHF Triangle within a Triangle
The four-hour chart below provides even more clues regarding support. Here, we see a confluence of support levels comprised of pin bars and a general estimate of the support from the rising trend line on the daily chart. Actually, price is already winding towards it.
Elliott wave fans will note the “N” formation of zig-zag 1, and that the inverse of that pattern may be in play as price goes towards support before it bounces. Of course, traders backing the break down will note that a head-and-shoulders pattern may also be forming. However, there is no telling who is right until the market gives the result.
Guest Commentary: Dual 4-Hour Patterns for EUR/CHF
For those uninterested in the technical jargon, the bottom line here is that the zone of support can be identified as 1.2294-1.2307.
A better entry could be taken on the hourly chart (not shown) if/when price gets to that zone, and the usual entry signals, including pin bars, bullish engulfing bars, and bullish reversal divergence, would be in play.
As always, it may take two or three tries to get it right, but in this case, price may well reverse suddenly upon reaching support. After all, abrupt turns are extremely common in consolidation territory, and if this happens, it will undoubtedly benefit the trade.
By Kaye Lee, private fund trader and head trader consultant, StraightTalkTrading.com
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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