Analys från DailyFX
DAX – Technical Formation Points to Explosive Move Soon
What’s inside:
- DAX adds even more importance to the December trend-line this week
- Rising wedge nearing completion, an often times explosive pattern
- Top and bottom-side levels to watch
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Again, this week the DAX put the December trend-line to the test, teetering on the brink of breaking it over the course of the past two sessions. But so far, so good. The outcome from yesterday’s ECB meeting was relatively benign and thus had limited impact on financial markets – namely the euro and European equity indices.
With this week’s hold of the trend-line rising up from the December swing low, further importance has been added to its presence since the last test at the end of February. It’s our ‘line-in-the-sand’ as far as we are concerned. A close below the trend-line and the most recent swing low at 11918 would quickly switch us from bull to bear.
Running with the notion of higher prices, what lies ahead? Those ‘pesky’ top-side trend-line running higher off a pair of peaks in 2016 still remain in the way of reaching record highs near 12400.
We’ve made mention in passing about a potential pattern development, but now that we are reaching towards its maturity it’s time to take it more seriously. A rising wedge is quickly closing in on full development; it should be there next week. These patterns are known to lead to explosive moves after price action spends a period of time coiling up. A rising wedge forming after an extended move higher (like now) can lead to a sharp decline should it trigger to the downside. Often times these formations in the context of a maturing bull-run are considered a bearish development, but not necessarily so. A break above the top-side of the wedge would also involve a breakout above the beforementioned 2016 trend-lines, which would be the opposite of bearish. A breakout would be viewed as the market’s opportunity to reach and exceed the 2015 record highs.
For now, we are running with support acting as, well, support. It is until it isn’t. But the DAX will soon be facing off with resistance in the form of the Feb high of 12082 and then the top of the rising wedge/2016 trend-lines. As far as the rising wedge goes, we will go with which ever direction it breaks – a pattern to react to, not predict.
DAX: Daily
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—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
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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