Analys från DailyFX

Can the US Dollar & Gold Price Advance Together? Sure They Can…

Published

7 år ago

4 september, 2017

DailyFX

What’s inside:

The US dollar looks to have put in a tradable low, with the DXY showing life at major long-term support
Gold has cleared major hurdles in recent weeks, suggesting higher prices are to come
Don’t get married to the inverse relationship between USD/precious metals; they can move in tandem

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Last week, we noted that the US Dollar Index (DXY) looked likely to have put in a tradable low after the Tuesday ‘spike-and-reverse’ from a zone of major long-term support. By the end of last week this view was further underpinned by continued strength on the heels of the strongest weekly turnabout in the euro in several months (the euro constitutes ~57% of the DXY). The August monthly candlestick in DXY had ‘doji-like’ characteristics in that it closed near the open with a range to the top and bottom-side. This represents a power struggle between buyers and sellers, which when arriving at a major level hints at a developing reversal.

DXY: Monthly

So, with the case for a USD bounce strengthening; where does this leave the outlook for precious metals? Let’s first take a look at the technical outlook for gold by itself and then visit the long-term relationship between the dollar and gold, and how that could play out over the shorter-term.

In recent weeks, gold has come a long way from a big-picture perspective. The weekly closing bar in early August was well above the widely-watched 2011 trend-line, giving indication that a long-term turnaround may pick up momentum. Last week’s price action furthered the bullish case with a breakout above the double-top formed from April to June; a hurdle which gold struggled with a couple of weeks ago. In total, the tech outlook for gold looks solid, paving the way towards possibly soon seeing the 2016 high at 1375 and higher.

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Gold: Weekly

With both the dollar and gold having bullish outlooks, something has to give, right? No, not necessarily. While it’s true the correlation between the metal and currency has been inverted over the long-run (i.e. – 5-yr correlation stands at -59%), the relationship does flip from time to time and the two will move in tandem. This year alone there have been three meaningful occasions when looking out over a few weeks (February, April-May, and June-July). Last week could have marked the beginning of a fourth occurrence (August-???).

Gold/DXY: Daily

What does this all mean? Other than the obvious, both can rise (or fall) together; it means when viewing the two markets it’s prudent to not over analyze how they are trading relative to one another and to observe price action in each market on its own merit. Also, remember correlation doesn’t measure magnitude. So while two assets trade together one may do-so with significantly more momentum than the other (i.e. – gold rallies strongly while the dollar trades higher with weak momentum, or vice versa). Also, it’s a good idea to keep in mind how changing correlations can impact the overall risk-profile of your trading account.

—Written by Paul Robinson, Market Analyst

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Analys från DailyFX

EURUSD Weekly Technical Analysis: New Month, More Weakness

Published

7 år ago

30 september, 2017

DailyFX

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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Analys från DailyFX

Euro Bias Mixed Heading into October, Q4’17

Published

7 år ago

29 september, 2017

DailyFX

Euro Bias Mixed Heading into October, Q4'17

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

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Analys från DailyFX

British Pound Reversal Potential Persists Heading into New Quarter

Published

7 år ago

29 september, 2017

DailyFX

British Pound Reversal Potential Persists Heading into New Quarter

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

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