Analys från DailyFX
DAX Dripping Lower, Bearish Outlook Remains Intact
What’s inside:
- DAX below neckline of ‘head-and-shoulders’ topping formation
- On its way to filling gap from first round of the French elections
- Key levels to watch including measured move target for HS pattern
Find out in our Q3 Forecast what’s driving the DAX and Euro this quarter.
The last time we were discussing the DAX it was stubbornly hanging onto support around the neckline of the ‘head-and-shoulders’ (HS) top we’ve been focused on. On Friday, it appeared we were finally headed for a clean break of the neckline and fill of the April gap (French elections). The break wasn’t the most convincing by the close of the session, but nevertheless the market is in the gap and trading below the neckline.
With the HS top having officially triggered we should continue to see weakness develop. This type of formation, as is the case with any technical pattern, has a measured move target (MMT) which is derived by its size (height subtracted from the neckline, in this case). That points to approximately 11630. But that is a symmetry-derived target and doesn’t take into account actual price points. With that said, there is support along the way which we’ll want to keep an eye on. The first up is the gap-fill not far below at 12048, then the swing-low in April at 11941, followed by a swing-low in March at 11850. The March swing-low is fairly minor in terms of its relevance, but the fact the 200-day MA clocks in right around the same point makes ~11850 a big support level. Then comes the measured move target at approximately 11630.
What will turn a bearish view around? The DAX has its work cut out for it before we begin seeing a bullish price sequence develop. For now, we’ll stick with a short bias until we see price action suggest we should do otherwise, and update as things progress. Stay tuned…
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DAX: Daily
—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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