Analys från DailyFX
DAX Bouncing, but Buyer Beware
What’s inside:
- DAX bouncing, but so far that is all it is until it can overcome key levels/lines
- Still in context of ‘head-and-shoulders’ formation
- Important support and resistance levels outlined
Find out in the Q3 Forecast what’s driving the DAX and Euro.
Since Friday the DAX has been in ‘bounce-mode’, but still stuck within in the context of a triggered ‘head-and-shoulders’ (HS) pattern. It’s been a bumpy ride lower, but nevertheless rallies for the past couple of months have been selling opportunities. In the weekly forecast, we noted that if ‘risk-off’ doesn’t grip markets then the bias was still for lower prices but there are levels from which the market could find temporary support.
The first level came at the April low around 11940 on the Friday gap-down. The bounce has held a decent amount of power so far, the strongest since the early-part of July, however; the market still remains in a firm trend of lower lows and lower highs. This morning, so far, we are seeing the DAX turn down from the trend-line off the mid-July swing-high. While price is above the neckline of the HS formation, a bearish outlook won’t truly be undermined until we see a recapture of not only the current trend-line hurdle, but also the one of the June high, as well as a break above the steadfast area of resistance surrounding 12300.
Looking lower on renewed weakness, the Friday low aligns roughly with the 200-day, so the area around 11940 may again provide a backstop on any slide which develops. Beneath there a minor swing-low from March at 11850 comes in as the next level, followed by a measured move target for the HS formation of roughly 11600.
Looking ahead to potentially market-moving fundamental events, we have the minutes from the last central bank meetings for both the FOMC and ECB on Wednesday and Thursday, respectably. For details on timing of these releases and other data, please see the economic calendar.
DAX: Daily
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—Written by Paul Robinson, Market Analyst
You can receive Paul’s analysis directly via email by signing up here.
You can follow Paul on Twitter at @PaulRobinonFX.
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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