Analys från DailyFX
Divergence with EURUSD and USDCHF; Reversal Coming?
- EURUSD and USDCHF divergence
- GBPUSD momentum considerations
- USDJPY tests important support
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Weekly
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-“Long term, a failed breakout and top would keep with the pattern of 3 year cycle tops. 1.3750 is an important reference point (year open).”
-“EURUSD resolved a triangle with a terminal thrust and reversal on the June ECB meeting. Several developments suggest that EURUSD is headed higher for at least several weeks. The reversal occurred from just above the 2014 low and near the 52 week average (which exhibits a positive slope but momentum has been trending down since August)…The implication from volume is that this low isn’t as strong as the November and July lows (the doing of smaller traders…think volume / transactions). There are 3 points to watch for resistance moving forward…1.3750/60, 1.3800, and 1.3840.”
-EURUSD has headed higher but the first cited resistance (1.3750) has yet to be reached. In fact, EURUSD remains below the post ECB high. 1.3670/85 is a level that should inspire a reaction (selling). How the market reacts at that level will help in assessing the next move.
Weekly
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-GBPUSD recently traded at its best level since October 2008. The level is also home to the 2005 low. The next big confluence is from the 1998 high and 50% retracement of the decline from the 2007 high at 1.7330/45.
-The momentum profile at multiple degrees of trend warns that the market may not make it to 1.7330/45 though. Daily RSI is divergent with the new price high (compare this June high with the May high) and RSI at the most recent peak is below 70. Weekly RSI also exhibits slight divergence and the indicator is still below 70.
Weekly
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-The combination of the .9400 figure and weekly RSI failing near 60 indicates a lot of overhead to punch through. Since the 2011 top, each RSI failure near 60 has led to a top or topping process (range for several weeks then a breakdown…that may be the case now).
Monthly
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-“Don’t forget about the line that extends off of the 1996 and 2007 highs. That line crosses through the 2008, 2011, and highs as well. In 2011 (record free float high), the rate surged through the line in late July before topping on August 1st.” NZDUSD sold off for 5 weeks, found low near the 50% retracement of the year’s range and has surged back to this seemingly magnetic line.
-Market conditions (volatility) is much different than it was in 2011 but the record free float high did occur in ‘blow-off’ fashion throughout July (the high was August 1st). If history were to rhyme, then know that the rally from the 2000 low would consist of 2 equal waves at .9203. Below .8650 probably means the rate topped for at least .8500.
Weekly
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-“USDJPY has bounced from the line that extends off of the February and 3/14 lows. The rally from the February low channels in a corrective manner and makes 104.12 important from a bigger picture bearish perspective.”
-“There is an Elliott case to be made for a return to the 4thwave of one less degree. The range spans 93.78 to 96.55. Of course, the path to get to that level is far from clear.” USDJPY is testing support from 101.35. 101.16 is also a reaction level. A larger breakdown is possible as long as price is below 102.80.
Weekly
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-USDCAD has fallen apart which ironically means it is probably going to find some sort of low soon. The rate is nearing important price levels.
-The 2011 high at 1.0657 and current year open at 1.0634 are possible supports. The line that extends off of the 2012 and September 2013 lows is at about 1.0607 next week. This level is in line with the July 2013 high at 1.0608.
Weekly
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-“USDCHF found top this week from just above the February 2013 low at .9020. The reversal probably caps USDCHF for at least a few weeks. Supports are seen at .8860 and .8800. In summary, the rate is probably capped for a few weeks before another rally attempt.”
-Near term developments warn of a turn towards USD strength, probably next week. USDCHF has slipped to a new low for June yet EURUSD is below its June high of 1.3676. These subtle divergences have pinpointed several important turns recently including the May turn when EURUSD exceeded its March high yet USDCHF stayed above its March low.
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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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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