Analys från DailyFX
DAX Tech Update: Momentum Brings Twin Peaks into Play
What’s inside:
- The DAX busts on through double-top neckline
- Skews trade towards the twin peaks created in August and September
- Bias upward in the short-run as long as the 10500 area holds
On Wednesday, we took a look at the double-top which formed back in August/September and considered the potential for the bounce unfolding this week only to be a retest of the neckline (old support turned new resistance). It was also noted we needed to see a turn lower in momentum, first, before considering it a valid retest. That wasn’t the case.
US markets got a shot in the arm following the outcome of the FOMC on Wednesday, and thus giving global risk appetite a boost into yesterday as well. That boost pushed the DAX clearly through the neckline and has taken all double-top considerations off the table, and, to the contrary, has increased the likelihood we see continue to see higher prices in the short-run.
The DAX sits perched not far below the double-top highs between 10780 and 10806 to be exact. A push to those levels is expected at the least in the near-term, even higher looks probable as long as the German index doesn’t find a slew of sellers off those peaks. That is to say, a shallow pullback or sideways price action at that juncture would suggest stocks are in demand and want to trade higher.
In the very near-term, pullbacks are viewed as potential buying opportunities up to around 10800 as long as support in the 10500 vicinity holds. This lines up with yesterday’s low at 10491. If the market is as strong as it has represented in recent trade, a decline that aggressive looks unlikely, but nevertheless that is our line-in-the-sand. A strong drop back below support and the low of yesterday’s ‘power’ day would be cause for pause on a bullish bias. If the DAX should trade up to the old peaks we will reexamine price action and go from there.
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—Written by Paul Robinson, Market Analyst
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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
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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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