Analys från DailyFX
A Tradable "3-Push" Set-up in GBP/CHF
Talking Points:
- Rare ”Three-Push” Pattern in GBP/CHF
- Potential Swing Move off Daily Support
- The Critical Support Zone to Watch
GBPCHF is currently in a mostly sideways area on the weekly chart, resting after a downward move. The big picture momentum is down, but this is not an area where large movements are expected.
Guest Commentary: Weekly Downtrend/Consolidation for GBP/CHF
The pair is in the midst of a downward swing, as indicated by the stochastic crossing down, or indeed a direct examination of the price action. Nonetheless, there is an interesting situation that has formed on the daily chart that makes a long position potentially desirable.
Traders will note the relatively rare “three-push” pattern on the GBPCHF daily chart. It consists of three equal pushes down within a fairly consistent channel. The second-to-last bar has a longish tail, which is a potential indication that the current downswing is nearly over. The Stochastic is still crossed down, but there may well be an entry long.
Guest Commentary: “Three-Push” Pattern on GBPCHF Daily Chart
The three-push pattern is an end-of-trend pattern, and if it truly develops, it would point to price going up well above the top of the channel (see below). That would be ideal indeed!
Guest Commentary: Potential GBP/CHF Move off Daily Support
To account for the fact that the weekly chart is still in a general downtrend, and also for the fact that a three-push pattern by its very nature defies the current trend, a support zone approximately half the size of the downward channel has been estimated.
Further, this zone has been adjusted to match previous price action, in particular, the late-August low. That zone is 1.4259-1.4400. It is a fairly large area, but there are two reasons why it is viable:
- The potential reward would be much larger;
- A trade trigger on the four-hour chart would allow for a smaller stop.
Guest Commentary: Critical GBP/CHF Price Points to Watch
On the four-hour chart, price still looks to be under pressure from a bearish flag pattern, so it may well be that the lower half of the zone will be challenged, and that would reduce the zone by approximately half, leaving the target area confined between 1.4529 and 1.4332.
This is the zone worth watching for signs of reversal divergence or some other bullish pattern on the four-hour charts for the coming week. Other patterns such as the inverse head-and-shoulders may also be tradable on the hourly chart. However, it is worth noting that the level of support is likely to prove flexible, and price may spike below it.
In the event that price closes below the range on the four-hour chart, however, it would be considered a break of the zone, rendering this set-up effectively null and void.
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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