Analys från DailyFX
Are We There Yet? EUR/USD Closes Higher 6 of the Last 7 Days
EUR/USD has been in a monster move to the upside closing higher in six of the last seven trading days. In fact, the daily RSI (Relative Strength Index) has surpassed the highest level since August 2015. Many traders look to RSI as a measure of overbought. Few look to RSI as a means to determine trend, which for EUR/USD, is firmly pointed to the upside.
According to the Elliott Wave model, it appears the trend is incomplete to the upside and further highs may be on the horizon. The break above the red trend line near 1.10 allowed us to elevate our alternate wave count that favors a retest of the 1.16 highs. This would effectively create a large flat or complex correction that began in March 2015.
(Grab out Beginner and Advanced Elliott Wave guide for more on what idealized flat and complex corrections may look like.)
The Elliott Wave model suggests this move to the upside is incomplete because we are looking for five waves to unfold higher beginning in January 2017. It appears the strong moves witnessed last week may have been the middle of circle wave iii. That implies a dip in wave iv and more pressure towards the 1.16 highs. Currently, there is a wave relationship near 1.1244. If this relationship holds, we may see a dip towards 1.10 that offers longs an opportunity to position towards higher levels.
Bottom line, a correction to 1.10 is not required within the wave model, but would be a normal correction in an uptrend of this nature. The wave model suggests a couple more bursts higher may be seen prior to a longer term top forming.
Sentiment has consistently shifted towards the net bears, which ends up being a bullish signal. IG Client Sentiment currently sits at -2.88. We will see symptoms of a turn coming if the sentiment reading shifts towards bulls and begins to move towards the positive side of the coin. Check out the live trader sentiment reading and learn how to trade with sentiment with our IG client sentiment guide.
—Written by Jeremy Wagner, CEWA-M
Discuss this market with Jeremy in Monday’s US Opening Bell webinar.
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Above, we previously discussed how a break of the red trend line hinted towards a test of 1.16. View the webinar recording at the 21:25 mark to hear the context of those comments.
Will AUD/USD be a late bloomer to the USD correction? Read more to find out.
Dow Jones Industrial Average appears to be grinding in a sideways triangle. See more on critical levels to follow.
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
Confidence is essential to successful trading, see this new guide – ’Building Confidence in Trading’.
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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