Analys från DailyFX
CAD/CHF Trend Trades for Any Risk Profile
Talking Points:
- Eye-Catching CAD/CHF Daily Price Action
- The Pair’s Critical Resistance Zone
- 2 Potential Trade Triggers to Watch for
This week’s surprise rate cut by the European Central Bank (ECB) has sent currencies running in various directions. In spite of this, the movement has actually cleared the decks a little, breaking various stalemates between bulls and bears. CADCHF is one such example.
The downtrend on the weekly chart (see below) is clear, and prices are now pulling back in a countertrend movement that traders can use in hopes of getting another move down.
Guest Commentary: Clear Weekly Downtrend in CAD/CHF
The daily chart below provides a picture of definite interest. Price is now heading up to the test the resistance zone formed by two trend lines. The initial question, however, is which trend line should be seen as the dominant one?
Guest Commentary: Dueling Trend Lines on CAD/CHF Daily Chart
Different traders will favor different ones, and there’s plenty of variety not shown above. The essential point, however, is that the two trend lines taken together identify a range of resistance that could kick in to limit the upward thrust in CADCHF.
The four-hour chart below provides an even better look at the key zone of resistance, and an estimate of those trend lines plus an upside buffer due to the speed of the news-powered movement makes the key zone of interest 0.8834-0.8929.
Guest Commentary: The Critical CAD/CHF Resistance Zone
Whether or not this zone will hold ultimately remains to be seen, but what is really needed is a reliable reversal pattern on the CADCHF hourly chart.
As seen below, the hourly chart has (at the time of writing) already begun to test resistance. As the markets are adjusting to a news shock, a reliable trigger will be needed, the most likely of which would be a pin bar (or bearish engulfing candlestick, which is less likely). Should this occur, price will likely hesitate and wind sideways.
Guest Commentary: 2 Potential CAD/CHF Trade Triggers
This would signal an entry only for bold or very skilled traders. It’s tradable, but requires nimble exit work should it start to fail.
More conservative traders would be advised to skip that signal and wait for price to climb a little higher, even if it takes a few more hourly bars. At that point, it should form a slower and more pronounced reversal pattern, probably one that’s even supported by reversal divergence. That would be the safer trade.
Even then, CADCHF may not do much more than idle sideways, but this would afford plenty of time to get out, unlike the earlier scenario. Of course, the hope is that there is a strong reaction off the overhead resistance zone, which would result in an early short entry on a downside trend trade.
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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