Analys från DailyFX
A Fast-Acting Triangle Set-up in GBP/NZD
Talking Points:
- Triangle Pattern on GBP/NZD Daily Chart
- Key Support Zone for Initiating New Longs
- A Potential Entry Signal Flashing Right Now
Most triangle patterns involve trading breakouts. However, the other trade that is possible under these circumstances is trading bounces within the triangle, and that is the opportunity being offered in GBPNZD today.
Although the bias on the below daily chart is slightly toward the downside, the rising line of support has been tested multiple times, and thus, traders would expect to see a bounce on the lower time frames that just might continue to the upside.
However, because the trade is occurring within a triangle, it is wiser to be defensive and to use multiple positions so that the trade can be scaled out of at the first sign of trouble. Afterall, trading in sideways markets always comes with such heightened volatility.
Guest Commentary: Daily Triangle Formation in GBP/NZD
The four-hour chart below readily provides a zone of support based on previous support and resistance coinciding with the rising trend line from the higher time frame. The final support zone has been estimated as 1.9382-1.9442, which is a zone 60 pips deep.
Guest Commentary: Key Support Zone for Buying GBP/NZD
The potential reward to the topside within the triangle is approximately 200 pips or more, which affords a very attractive overall risk profile of 3:1.
Regardless, the trade is to be taken using the lower time frames in order to provide an optimal risk-controlled opportunity. For this, the hourly chart below is used.
At this level of magnification, a good amount of momentum has been visible recently, but it has been countered by a large and significant bullish engulfing candlestick coming out of the support zone. As price has pulled back down slightly, aggressive traders may choose to enter at this point at a better price close to 1.9468, which would be perfectly legitimate and acceptable.
Guest Commentary: GBP/NZD Long-Entry Signal Flashing Now
More conservative traders may wait and see if price will give a lower low in the next few hours, and would consider bullish reversal divergence, pin bars, and/or further bullish engulfing patterns as viable entry signals from there.
Candidly, the author is more than satisfied with the current bullish engulfing pattern. Even if the trade stops out, it will do so on small risk. As always, however, two or three attempts can be made in order to capture the move if and when it happens.
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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