Analys från DailyFX
A EUR/AUD Short with "Huge" Profit Potential
Talking Points:
- Retest of a Broken EUR/AUD Trend Line
- Key Zone for Initiating New Shorts
- An Entry Signal That’s Forming Right Now
As markets begin to find their rhythm for 2014, we’re beginning to see some more traditional trading patterns. For example, EURAUD has just broken a rising line of support and is now in the process of re-testing it before it decides whether or not to head even lower.
On the daily chart below, a potential head-and-shoulders pattern is developing, and one factor that favors the down side is the fact that price has already managed to produce a lower low.
Guest Commentary: Retest of Broken EUR/AUD Trend Line
Although classical technical analysts require a lower high as well, conditions are favoring a move lower, or at least a consolidation. As a result, a short trade is in order, as this could be the beginning of a new downtrend in EURAUD.
The four-hour chart below demonstrates a beautiful zone of resistance, which is already beginning to come into play. This zone comprises the rising trend line and a medley of previous support and resistance.
Guest Commentary: Key Resistance Zone in EUR/AUD
At the time of writing, price suddenly made a swipe downwards, which suggests that this trade may be preparing to go already. The zone of resistance is estimated as 1.5287-1.5337. As always, however, gaining a precision entry requires going one time frame lower.
Turning to the hourly chart, the trigger would come in the form of bearish reversal divergence, pin bars, or bearish engulfing patterns, and in actuality, a bearish divergence has already formed. Thus, although the entry is late, traders should still be able to hop on with limit orders.
An entry price between 1.5274-1.5280 should be achievable, as price still has to deal with a line of rising support, which could hold it in place for a while yet.
Guest Commentary: EUR/AUD Entry Signal That’s Forming Now
As always, two or three attempts may be required to hop onto this downward move, but given the huge profit potential stemming from the high on the daily chart, this is definitely a potential move that’s well worth trading.
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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