Analys från DailyFX
A Triangle-Inspired Elliott Wave Short in GBP/AUD
Talking Points:
- Elliott Wave Triangle Formation in GBP/AUD
- Key Resistance Zone for Initiating New Shorts
- Large-Scale Gartley Pattern on Hourly Chart
GBPAUD has been in a strong uptrend on the higher time frames for quite some time now, but the pair now appears to be in an established triangle formation. What is more interesting, however, is the Elliott wave implication for this pattern, as seen on the below daily chart.
Guest Commentary: Elliott Wave Triangle in GBP/AUD
According to standard Elliott wave theory, a triangle should have five legs, and in the case of GBPAUD, only the first two are clear at this point. The third wave appears to be in progress, and considering these waves tend to have two ”legs” to them, the most immediate trade of interest would be the opportunity to ride it down.
Although countertrend in nature, there is a possibility for a 350-pip move to the support level, which is quite sufficient for a swing trade, not to mention an intraday set-up.
Whether or not the triangle formation will play out as theory suggests is another matter, but for the most part, if the set-up triggers and can be taken to the breakeven level quickly, that is of little consequence. Afterall, another long trade can then be initiated once GBPAUD reaches the bottom of the triangle.
The key resistance zone on the four-hour chart (see below) is easily obtained from a study of past resistance, and indeed, price has already tagged this area. However, given the sudden surge of momentum just prior to the touch in the form of the long bullish candle, and in recognition of the countertrend nature of this trade, it is best to allow for a second test before initiating a short position. If the trade runs without allowing for this more conservative entry, so be it.
Guest Commentary: Key Resistance Zone for Selling GBP/AUD
The risk zone emerges as 1.8598-1.8684, which is a reasonable 86 pips when considering the overall risk profile of this trade. Nonetheless, this may be too much to stomach for some traders, and for this reason, the ideal trade entry would be taken on the hourly chart.
As seen below, the hourly chart of GBPAUD lends some credence to the trade in the form of a large-scale Gartley pattern. This particular set-up may seem controversial to some harmonic pattern purists, especially since there are higher highs on the left side of the chart, but past experience dictates that this Gartley formation is acceptable.
Guest Commentary: Large-Scale Gartley Pattern in GBP/AUD
In this case, the ideal entry signal would be bearish reversal divergence, although pin bars and/or bearish engulfing patterns would also be acceptable. As always, traders are advised to be prepared to make two or three attempts to get in on this move.
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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