Analys från DailyFX
DAX & CAC 40 Trying to Negate Bearish Price Patterns
What’s inside:
- DAX and CAC working on breaking bearish price sequences
- Developing sideways price action looking more bull than bear
- CAC trading just below major long-term trend-line
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On Friday, we said the rising wedge the DAX (CAC, too) broke down from last Tuesday was at risk of failing to hold its often-times bearish outcome. But as we pointed out then, and again in the weekly forecast, there could be a ‘head-and-shoulders’ (HS) pattern developing. Now that is at risk of not even coming to the point of triggering (decline below the neckline).
The market is chopping around, hasn’t held the same obvious directional bias (down) the U.S. markets have held recently. And looking more locally to the CAC, it is acting well given it broke down out of the same bearish pattern the DAX did, but from a long-term trend-line (2000-present), which seemed to set the French index up for a potentially harder break. But it didn’t. At least not yet.
Where do we go from here?
Given the DAX isn’t acting as expected since breaking the rising wedge (this pattern tends to lead to sharp moves), and the HS formation is at risk of not providing an official trigger by breaking the neckline, the month of March to date could be a bullish consolidation period. Or choppy range activity eventually resulting in a break in either direction. More time is needed, but things are starting to look more bull than bear. For now, we’ll take a wait-and-see approach with risk/reward unfavorable in either direction.
DAX: Daily
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The CAC 40 acting well at the 16 ½ year trend-line is encouraging for the bullish case. As we said earlier, with bearish price action taking shape beneath the long-term barrier you would think it would have fallen out of bed by now. Perhaps given the length of time of the trend-line it will take some churning before it does so, but so far things are shaping up more bull than bear. A breakout above the trend-line, especially on a weekly closing basis, would be considered a pretty bullish event and one which could lead to much higher prices for stocks in France.
CAC 40: Daily
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—Written by Paul Robinson, Market Analyst
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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.
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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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