Analys från DailyFX
AUD/USD Catches Highest Price in 2 Years; What’s Next?
Since May 19, the model we have been following implied an eventual retest of 79 cents. Now that prices have cleared the previous 12 month consolidation rising to the highest price in 2 years, what does the Elliott Wave model suggest?
The model we are following shows a major wave relationship near .7911 and a minor wave relationship near .7956. These two wave relationships appearing this close together may suggest a reaction lower is looming. Due to the structure of the pattern since September 2015, we can consider the whole corrective sequence higher complete, though it is a little early to confirm.
The Elliott Wave model we are following is a complex correction higher that began September 2015 as an expanded flat, followed by an ‘X’ wave triangle, followed by a zigzag.
The biggest clue about this complex correction is the ‘X’ wave triangle. We know from Elliott Wave theory that triangle patterns precede the ending move of the pattern at the next larger degree. The triangle pattern formed from April 2016 and ended in May 2017 at .7378. That suggests this move higher is a terminal wave to end the sequence that began September 2015.
(View webinar recording on triangle patterns, how to read them and how to trade them.)
Closer inspection of the May 2017 to current up trend, we are anticipating some type of A-B-C pattern. We can count a zigzag complete where the distance of wave C equals the distance at wave A at .7956.
(Learn more about zigzag patterns in this webinar recording on zigzags.)
If this pattern holds, then we can anticipate a large sell off to begin from nearby levels and retest 69 cents. Before we get excited about a bearish reversal, let us wait for price and sentiment to confirm a turn.
IG Client Sentiment is running at -2.73. If we see this number start to elevate and increase, then it would be symptomatic of a bearish turn in price that would line up with the Elliott Wave model. Learn how to trade with sentiment with our IG client sentiment guide.
Three DailyFX analysts selected the Australian Dollar as their top trade for 2017. Read pages 13, 18, 20 of DailyFX’s Top Trades of 2017.
—Written by Jeremy Wagner, CEWA-M
Discuss this market with Jeremy in Monday’s US Opening Bell webinar.
Follow on twitter @JWagnerFXTrader .
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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
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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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