Analys från DailyFX
DAX Losing Steam, but Still Constructive; CAC In Need of a Pullback
What’s inside:
- DAX sees limited reaction to expected election outcome
- German benchmark losing steam but still remains constructive
- CAC is on the extended side, it could use a rest before attempting to trade higher
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Over the weekend, Chancellor Angela Merkel was re-elected, but her party alliance (CDU/CSU) experienced its worst result since elections began in 1949. However, the outcome sparked very limited volatility given it was within expectations. It was indeed a quiet period on the headline-front leading up to the election. This morning, the market started off with a small gap lower but has seen back-and-forth trading since.
The initial push through major resistance surrounding 12300 was a powerful one earlier this month, but since then we’ve seen choppy price action with a slight upward bias. The DAX is losing steam, but remains constructive within a channel as long as we don’t see a sharp break lower. A breakout above Friday’s high at 12646 will quickly bring in the July high at 12676. If the German benchmark can get into gear above the July high there aren’t any significant hurdles until the record high at 12951. However, if we see a bearish rejection at the July threshold then we’ll have to take stock of any technical damage as a result.
DAX: Daily
The CAC has been persistently rallying without going through any kind of consolidation phase, and as a result could be in for underperformance relative to the DAX as overbought conditions build. It’s been an impressive rally off the 8/29 low and the bull-flag breakout earlier this month suggests higher prices are to come. At this time, though, the market may be in need of a small pullback or consolidation period before trading through levels created during May and June. Barring a swift reversal the overall outlook remains constructive.
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CAC: Daily
—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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