Analys från DailyFX
DAX: Pressing Resistance Ahead of BoE Meeting
What’s inside:
- DAX clears one level of resistance, faces bigger one now at 10000/100
- Anticipated stimulus in key economies is helping push markets higher
- BoE could be a short-term catalyst for a pullback
On Tuesday, the DAX continued its advance from the July 7 low, clearing resistance in the 9730/820 vicinity, and in the process of doing so it made a higher from the July 4 swing high. This put the DAX up against another important area of resistance which has been in play since March – 10000/100. The higher high created wasn’t the most noteworthy given the generally sloppy and unreliable short-term trends in recent months, but nevertheless it is a higher high above resistance. Yesterday, the market took a breather just below 10k, but today it is again attacking the 10000/100 zone.
This brings us to an interesting juncture with the BoE rate decision coming up later this morning at 11:00 GMT. As we said yesterday, the FTSE appears to be set up for a ‘buy the rumor, sell the news’ scenario with the market already effectively pricing in central bank actions.
To rewind for a minute: Risk sentiment began quickly recovering following ‘Brexit’ and further mended itself a few days later when Carney hinted towards a summer stimulus plan. This week got off to a good start when Shinzo Abe was reelected for another term as Japan’s Prime Minister; more stimulus in Japan is anticipated sooner rather than later. The DAX, which has a 12-month correlation to the Nikkei of nearly 90%, of course joined in on the optimism.
With global markets all responding to fresh rounds of anticipated stimulus, stocks are poised for a decline given some of the already priced in expectations. The FTSE, and other markets in response, may initially pop higher, but we look for it to wear off quickly. With that in mind, resistance in the DAX looks like it could be formidable to overcome. Should the DAX continue to clear through 10000/100 with authority, though, then we will look to the 10250/300 vicinity as our next strong zone of resistance.
We will be watching that 9730/820 zone as support on any decline which may unfold from here.
DAX (Ger30) Daily
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—Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX.
You can email Paul at probinson@fxcm.com with any questions or comments.
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
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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