Analys från DailyFX
A Fascinating GBP/CAD Short Unfolding Now
Talking Points:
- Double Trend Line Break in GBP/CAD
- Key Zone for Initiating Short Positions
- Possible Entry Signal That’s Already Forming
Even in the choppy world of currency trading, things can get interesting when two trend lines break in quick succession, especially when one was a downside break and the other was to the upside. That’s precisely what has happened on the GBPCAD four-hour chart (see below).
Guest Commentary: Double Trend Line Break in GBP/CAD
The downside breakout can be considered a fake move at this point due to the upward spike in momentum. As a result, the question remains whether the upside move is true or false. Two possibilities are marked on the chart, one where price returns to test support before shooting up, and the other where price returns to test support before going further down.
Before either scenario develops, however, the price pullback to support is a reasonable move to trade. If price continues to the down side, then we will have entered at the top of the right shoulder in a classic head-and-shoulder pattern.
If price bounces, the trade will still be able to make some money. However, due to the relatively small size of the pattern, lower time frames will be needed.
The hourly chart below presents a clear zone of resistance based on previous consolidations. There is one factor going against this trade, however, and that is the rising momentum in price. Nonetheless, this is a legitimate resistance area, and one that can be traded—and managed—accordingly.
Guest Commentary: Key Resistance Zone for GBP/CAD
The 15-minute chart below is the trigger chart, in this case, and the usual entry signals will apply: pin bars, bearish engulfing patterns, and/or bearish reversal divergence.
Guest Commentary: GBP/CAD Entry Signal That’s Forming Already
A pin bar has already formed at this point, and a break of the pin bar low would constitute a valid entry signal. It may or may not work the first time, so the usual two or three tries at the entry may be necessary.
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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