Analys från DailyFX
Big Day Ahead for EUR/USD and GBP/USD with BoE, ECB, and US GDP
Talking Points:
– BoE meeting unlikely to offer new surprises as UK economy continues to improve.
– Both policy statement and press conference will be important for ECB today.
– Expect higher than usual volatility in pre-US equity market hours.
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INTRADAY PERFORMANCE UPDATE: 10:45 GMT
Dow Jones FXCM Dollar Index (Ticker: USDOLLAR): +0.10% (+0.08% prior 5-days)
ASIA/EUROPE FOREX NEWS WRAP
Price action has been exceptionally quiet overnight outside of the AUD-crosses (thanks to a disappointing Australian labor market report), as investors gear up for significant event risk in the pre-North American session hours. Of note, there are three “high” importance events due out between 07:00 EST and 08:30 EST (12:00 GMT and 13:30 GMT) aimed directly at three of the most heavily traded currencies in the world, the British Pound, the Euro, and the US Dollar.
While each of these events poses risk to the EURUSD and the GBPUSD, risk is disproportionate given the run up in prices ahead of these events as well as consensus expectations. The least exciting of three events, the Bank of England Rate Decision, will kick off the morning as the GBPUSD finds itself trading back in the middle of an eight-week sideways range:
GBPUSD H4 Chart: September 10 to Present
The break in GBPUSD through the uptrend off of the July, August, and October lows on October 30 sent the pair towards $1.5880/900, range support dating back to September 15. Yet with UK economic data continuing to improve and only a modest improvement developing in underlying US Dollar fundamentals over the past week, there’s been little impetus for a further breakdown, which would set in motion a Double Top in the pair.
Accordingly, we are taking time into account when considering the impact of the BoE today, in that failure to close above 1.6100 could threaten the rebound off of last week’s lows; and for the bull case to reignite, price needs to take the July-October rising TL, coming in at 1.6130 at today’s close (1.6170 by the end of the week). Otherwise, the 1.5880/6260 range should hold for the near future.
EURUSD H4 Chart: September 22 to Present
The EURUSD is far more exciting that the GBPUSD today, given the rising expectations behind the European Central Bank Rate Decision and the 3Q’13 US GDP report. Unlike the UK, the Euro-Zone and US economies have seen a stretch of weakening data that has led to speculation that additional monetary easing from the ECB and the Fed might be necessary.
Read more: Rising US Yields Building Base for USD, but Don’t Dismiss EUR Rally
ECONOMIC CALENDAR – UPCOMING NORTH AMERICAN SESSION
See the DailyFX Economic Calendar for a full list, timetable, and consensus forecasts for upcoming economic indicators. Want the forecasts to appear right on your charts? Download the DailyFX News App.
— Written by Christopher Vecchio, Currency Analyst
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
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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
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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