Analys från DailyFX
A GBP/CAD Short That Dispels Classic Technical Methods
Talking Points:
- Rare Formation on GBP/CAD Daily Chart
- Mixed Signals on 4-Hour Chart
- The Ideal Time Frame for Shorting GBP/CAD
It is rare for support and resistance to not be immediately evident to traders when using traditional technical analysis techniques, but the pattern on the below daily chart of GBPCAD may well qualify as one of those instances.
The price action yields a pair of parallel channels in which all the lines have acted as significant support or resistance throughout the course of the trend. Although not as popular a technique as the classical trend line analysis, this method is valid basis for finding trade set-ups as well.
Guest Commentary: Parallel Channels on GBP/CAD Daily Chart
In this particular situation, even a move to the previous support level could have 270 pips or more in it, and if the trend ends, there would be, of course, room for even more. This is more than sufficient for justifying an intraday trade on the lower time frames.
The below four-hour chart of GBPCAD makes this trade a little more suspicious, as the consolidation area that coincides with the line of resistance shows some weakness. As seen, the initial bounce off of this resistance zone was rounded, and upon the second test, price managed to break through it after only a little while.
Nonetheless, this trade is bolstered by the fact that there has been relatively little momentum as price heads up towards this area, and as a result, it still represents a reasonable trading opportunity.
Guest Commentary: Mixed Signals on GBP/CAD 4-Hour Chart
The exact zone of resistance is estimated on the four-hour chart as 1.8215-1.8304. However, trades should be taken on the hourly chart (see below) using bearish reversal divergence, pin bars, and/or bearish engulfing patterns as entry triggers.
Considering the resistance zone on the four-hour chart is only 89 pips deep, and the hourly chart will likely provide entries with even smaller risk (perhaps around 40 pips), the risk profile for this trade is more than acceptable.
Guest Commentary: Ideal Time Frame for Shorting GBP/CAD
The hourly chart of GBPCAD also shows a rising wedge pattern, which happens to terminate in the key resistance zone. This lends some added strength to the zone despite the initial questions about its validity.
As always, two or three tries may be needed before this trade works, but if it does pan out as shown, it would be more than worth the effort and capital.
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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