Analys från DailyFX

A EUR/CAD Trade That’s on the "Straight" and Narrow

Published

11 år ago

29 november, 2013

DailyFX

Talking Points:

3 Reasons to Handle This Set-up with Care
Horizontal Resistance Line on EUR/CAD Chart
A Concluding 5-Wave Upward Pattern

Despite their popularity, horizontal lines of support and resistance must be treated with care for several reasons:

It is all-too-easy to falsely interpret horizontal levels on the charts if not careful.
Even if the levels are valid, due to their popularity, they are often slightly overrun. (The great debate between those who believe that the market is manipulated and those who believe it is simply a natural phenomenon continues. We will stay comfortably on the sidelines on that one, though. Frankly, it doesn’t matter as long as it can be traded.)
Without supporting price and momentum patterns, a horizontal line on a chart remains just that.

Today’s trade on EURCAD helps illustrate all three of these factors.

EURCAD is in a daily uptrend, as denoted by the rising parallel channel. However, the last pullback towards support was quite steep, suggesting motivated sellers. Even though prices have since risen, gains have not been as spirited as some of the previous upswings, and this suggests that there may be a reaction at the horizontal level of resistance.

Guest Commentary: Horizontal Resistance Line for EURCAD

It is worth noting that perfect double tops are relatively rare in forex, but against this backdrop, it is at least worth considering the possibility of a short-term trade favoring the down side in EURCAD.

The four-hour chart below helps reinforce the level of resistance, as Elliott wave counts seem to identify a five-wave move heading upwards. In order to better identify the zone of resistance, two Fibonacci expansions were used:

The first expansion measures wave 1 and projects the levels from the bottom of wave 2.
The second expansion measures wave 3 and projects the levels from the bottom of wave 4.

The confluence of resistance provides a workable zone of resistance: 1.4420-1.4521.

Guest Commentary: Five Waves up for EUR/CAD

As price rises to the horizontal resistance level, traders can go down to the hourly chart (not shown) to get a sharper entry, and the usual pin bars, bearish engulfing patterns, and/or bearish reversal divergence formations would serve as viable trade triggers. Bearish reversal divergence is particularly important in this case, as price is already beginning to show signs of slowing down.

This is a shorter-term trade and is unlikely to turn the trend, but the end of a five-wave pattern should begin an A-B-C (or two-legged) pullback, which should be enough to earn a reasonable return.

Although this is a countertrend trade, it is especially viable because of the large bearish drop that materialized earlier on the daily chart. This is a trade that should be taken using half the normal risk, and as usual, it would be best to be prepared to take two or three tries at getting in.

By Kaye Lee, private fund trader and head trader consultant, StraightTalkTrading.com

Analys från DailyFX

EURUSD Weekly Technical Analysis: New Month, More Weakness

Published

7 år ago

30 september, 2017

DailyFX

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

Confidence is essential to successful trading, see this new guide – ’Building Confidence in Trading’.

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.

Analys från DailyFX

Euro Bias Mixed Heading into October, Q4’17

Published

7 år ago

29 september, 2017

DailyFX

Euro Bias Mixed Heading into October, Q4'17

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

Analys från DailyFX

British Pound Reversal Potential Persists Heading into New Quarter

Published

7 år ago

29 september, 2017

DailyFX

British Pound Reversal Potential Persists Heading into New Quarter

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