Analys från DailyFX
A Nearby "Hot Spot" for GBP/NZD Longs
Talking Points:
- Aggressive Downtrend and Consolidation in GBP/NZD
- 4 Concurrent Bullish Signals Flashing Right Now
- How to Trade a New GBP/NZD Uptrend
Today, we look to the daily chart of GBPNZD, where a bullish technical event has now shifted the dynamics on the chart to favor further upside price movement. The pattern on the below chart should be especially interesting for swing traders who like to catch medium- and longer-term market movements.
One simple yet powerful thing to keep in mind about support and resistance is that the dominant levels on the weekly time frame generally act as major turning points in the market. As shown, GBPNZD tested a major weekly resistance level in February 2014, and it’s no surprise that the market sold off aggressively from this point and began a full-blown downtrend from there.
Guest Commentary: Aggressive Downtrend in GBP/NZD
The downtrend lasted for several weeks, with nearly every daily candle closing much lower than the day’s opening price. These “straight-line” trends can be very potent and produce explosive price movements. However, we all know the market doesn’t move in a straight line forever.
After the strong downtrend momentum died off, GBPNZD fell into a consolidation phase, grinding sideways for a little over a month. A general rule of thumb for such consolidation patterns is that the longer the consolidation, the more potent the ensuing breakout. And, consistent with that rule of thumb, during last week’s trading, bullish momentum in GBPNZD built up to a critical level and we finally saw an initial breakout.
As shown, GBPNZD breached the key resistance level that had been containing price for the month prior. This bullish rally ultimately continued and resulted in the formation of new recent highs.
Essentially, the dynamics have now gone from bearish to bullish for GBPNZD, and technical signals are aligned and suggesting further upside movement ahead. Some of the key points that currently give a bullish bias include:
- GBPNZD is now trading above the critical resistance level
- A higher high has been formed
- Price is trading on the bullish side of the mean value, as indicated by the 10- and 20-period exponential moving averages (EMAs)
- The mean value is angled upwards, reflecting this new bullish momentum
How to Trade a New GBP/NZD Uptrend
In all, we’re looking for the potential formation of a sustained bullish trend in GBPNZD, and are waiting for the market to weaken and correct back downwards to re-test the previous resistance (now support) level. If this market has any chance of developing a clean new uptrend, this horizontal level will need to hold as support.
Guest Commentary: Key Support Zone for Buying GBP/NZD
The area we’re targeting for possible long-entry positions also coincides with the mean value (10 and 20 EMA), which behaves as dynamic support during bullish trends.
The synchronicity of these uncorrelated variables creates a nice “hot spot” where bullish reversal set-ups may develop. Traders should wait for bullish candlestick reversal patterns including pin bars, engulfing candles, outside candles, or even proprietary, system-generated buy signals before initiating new long positions.
When we switch over and look at price action on the weekly chart of GBPNZD, it’s easier to see the “bigger picture” and discern longer-term market direction. As shown below, the weekly chart suggests the pair is looking to retest the major weekly resistance level around the 2.0200 level, as range-bound conditions continue to prevail on the weekly time frame.
Guest Commentary: Prevailing Weekly Range for GBP/NZD
By Graham Blackmore of TheForexGuy.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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