Analys från DailyFX
CAC 40 Channels Ahead of FOMC
Talking Points
- The CAC 40 Consolidates Ahead of Today’s FOMC Rate Decision
- Daily Channel Resistance is Found Near 4,660
- Sentiment is Negative with SSI reading at -1.28
CAC 40 Daily Chart
(Created using Marketscope 2.0 Charts)
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The CAC 40 is little changed this morning, trading up .19%, as international markets await todays FOMC rate decision. Expectations are for the FOMC to hold key rates at .50%. Any deviation from this policy could have a systemic effect on markets as central banks are now seen as coordinating their policy decisions. Regardless of the outcome of today’s FOMC event, traders should expect increased volatility from markets around this high importance release.
Technically, the CAC 40 has been trading in a descending price channel going back to the August 2015 high at 5,218. Prices have been retracing slowly back towards channel resistance for the last two months, after putting in a new swing low at 3,890. Now as prices close in on this long-term resistance near4,660, prices are again consolidating.
CAC 40 4Hour Chart
(Created using Marketscope 2.0 Charts)
In the graph below, we can see this consolidating with a short-term price channel developing on the 4Hour chart. If prices breakout above the displayed line of declining resistance, I would then look for prices to challenge the longer term resistance line near 4,660. Alternatively, if prices break lower, it opens prices to retest our previous swing low. In this scenario, traders should first look for prices to challenge the previous swing low at 4,424, followed by a move to a new monthly low beneath 4,211.
Find out the latest positioning totals with DailyFX’s sentiment page
As of this morning SSI (speculative sentiment index) for the CAC 40 (Ticker: FRA40) stands at -1.28 with 56% of positions net short. When taken as a contrarian signal this small negative value has a slight bullish bias. If prices break higher, outside of the depicted price channel, it would be expected to see sentiment figures turn lower. Conversely, if prices channel lower, traders should watch for SSI totals to flip to a positive reading.
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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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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
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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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