Analys från DailyFX
DAX Remains Global Laggard, Favored Market for Shorts
What’s inside:
- DAX stuck below strong resistance over 12300 following break of HS top
- Currently in a range-bound trading environment
- Overall technical landscape favors shorts
Find out in our Q3 Forecast what’s driving the DAX and Euro.
The other day we were discussing the inverse relationship between the DAX and the euro and suggested that it may be possible if the euro declines we see some life come into the DAX. It was also said that while it’s a relationship worthy of attention it can weaken, leaving us without a reliable guide. So far, we’ve seen a little euro weakness and we’ve also seen some risk aversion come into global markets with tensions with North Korea rising, which has resulted in a declining DAX. The risk-off environment at this juncture is very modest at this time, however. Very. You’ll know real risk-off when it hits. This isn’t it. Yet.
The technical outlook for the DAX remains the same – trending sideways to lower within the context of a triggered ‘head-and-shoulders’ top. Even though just a couple of days ago the market was trading above the neckline of the pattern, the 12300/40 region has been very difficult to overcome. On any attempt from here to break on through will also require a breakout above the trend-line running down off the June high. A lot to overcome before possibly turning the outlook bullish.
This morning we are trading right near several lows created over the past couple of weeks just below 12100 (12092 is the precise low). We could bounce around between resistance in the 12300-area and roughly 12100 in a range-bound trading environment. But if we break below 12092 look for not only the French election gap to fill at 12048, but for a drop to develop below 12000. Levels to watch come in at 11941, 11906(200-day) and then 11850.
The bottom line is the DAX has its work cut out for it to improve its outlook for the bulls, but doesn’t necessarily mean it will be an easy road for the bears. As long as the DAX stays below beforementioned resistance just over 12300 then the trading bias is from the short-side with in mind we’ll have a range-bound market environment with a negative tilt to it and the possibility of a breakdown looming.
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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