Analys från DailyFX
Controversial Pattern, But a Clear NZD/CHF Trade
Talking Points:
- Strange Diamond Pattern in NZD/CHF
- Key Zone for Initiating New Short Positions
- Mixed Short-Term Signals to Contend with
Trading within ranges amidst irregular patterns appears to be the flavor of the week, and staying with that theme, the weekly chart of NZDCHF currently shows one of the oddest looking diamond patterns seen in recent memory.
Guest Commentary: Weekly Diamond Pattern in NZD/CHF
Of course, skeptics could simply focus on the triangle portion, which is the second half of the diamond formation. As seen above, it is clear enough and is relatively uncontroversial in comparison. From an analytical standpoint, it will not make too great a difference.
The daily chart below indicates resistance overhead, as price begins an extension move upwards. All that remains is to identify a logical zone of resistance where new short trades can be initiated. This will be in line with the weekly chart’s downward trend, which means that overall risk profile should certainly be in order.
Guest Commentary: NZD/CHF Trading Near Overhead Resistance
The actual resistance zone is derived on the four-hour chart below, as is customary for trades taken on the hourly time frame. Price action has been somewhat messy on the four-hour chart, but the final zone of resistance is ultimately identifies as 0.7503-0.7542. Price has yet to reach this zone, which should leave traders plenty of time to prepare for a possible entry.
Guest Commentary: Key Zone for Selling NZD/CHF
The hourly chart actually shows some mixed signals for this trade. In particular, there has been some bullish price action of late. However, this is tempered by the hidden line of support turned overhead resistance. With some luck, which is always helpful in consolidating markets, this level will continue to hold.
Guest Commentary: Mixed Signals on NZD/CHF Hourly Chart
As usual, the ideal trade triggers would be bearish reversal divergence, pin bars, and/or bearish engulfing patterns on the hourly chart. With the weekly trend potentially resuming from here, it is definitely worth taking two or three tries at getting in on this trade. The risk zone is less than 40 pips wide afterall, and an hourly entry will likely provide stop losses in the 15- to 20-pip range.
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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