Analys från DailyFX
A EUR/GBP Short That May Trigger Any Moment
Talking Points:
- Hidden Trend Lines on EUR/GBP Daily Chart
- Narrow Resistance Zone Immediately Overhead
- The Ideal Time Frame for Taking This Trade
As shown below, EURGBP is in a downward channel on the daily chart, but what many traders will likely miss are the two hidden trend lines within the larger channel, which have been noted here as well.
Guest Commentary: Hidden Trend Lines on EUR/GBP Daily Chart
Price has just headed up to pierce one of these hidden trend lines, and given past history, it is reasonable to expect a downward reaction from here.
It’s possible that price will make a new low, with 80 pips or more in the trend continuation. If it simply reacts, there should still be enough room for traders to get in on the short side. It’s important to consider, however, that EURGBP is a relatively slow mover, and thus, proper position sizing is especially important.
Obtaining a zone of resistance is relatively straightforward in this case. There is an obvious consolidation area in recent history, and the estimated resistance zone emerges as 0.8227-0.8251. Price has already entered this area on the below four-hour chart and looks ready to give a pin bar, which would be a valid entry signal.
Guest Commentary: Short Signal on EUR/GBP 4-Hour Chart
As the key resistance zone is only 24 pips deep, the risk profile is quite favorable, especially when considered in conjunction with a lower-time-frame trigger, which we will do using the below hourly chart.
Triggers on the hourly chart would include the usual suspects: bearish reversal divergence, pin bars, and/or bearish engulfing patterns. Price looks to be already completing a second consecutive divergence, although at the time of writing, it could not be confirmed just yet. Should it occur, however, a break below the current black candlestick would trigger a valid short entry.
Guest Commentary: Ideal Time Frame for Shorting EUR/GBP
Two or three tries may be required to get in on this move, but given that there has already been one divergence, the second one is likely to work. With a relatively small stop loss on the hourly chart, the favorable risk profile makes this trade all the more worthwhile.
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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