Analys från DailyFX
Dollar Technical Analysis: DXY Sitting At Trend Support
Talking Points:
- Dollar Technical Strategy: zone of resistance at 102.52/103.20 keeps focus lower
- US Dollar Teetering as the US Yields Threaten Pullback
- Prior Post: US Dollar Technical Analysis: RSI Divergence In Focus Below 103.20
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The Dollar Index remains out of short-term favor in the second week of trading for 2017 as shown by price pushing towards the January 5 low of 101.30. A key theme we’ve been watching that has provided a leading indication of currency strength and weakness have been sovereign yield spreads.
We’ve recently seen a pull-back in U.S. Treasury yields, which has narrowed the sovereign spread, which has provided support for DXY counterparts. For die-hard fans of Ichimoku, the UST 2yr Yield has broken below the 4-hr cloud, which could be indicative of falling bullish momentum as yields move higher on the anticipated hawkish action from the Fed. There is often a very similar price pattern in USD/JPY and UST 2yr Yield patterns, and USD/JPY has also shown a reason for concern.
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The chart below shows a retracement from an over-cooked DXY that was trading briefly above the price channel has now moved back to the channel median line. There has been a disappointing follow-through following Friday’s payroll numbers, which seems to favor further downside as positioning was rather heavily stretched going into the announcement.
The market appears to be well bracketed to help show traders where the path of least resistance lies given the fundamental backdrop. A break below the January 5 low would indicate a sharper drop to the December 14 (FOMC day) low of 100.73 or possibly the December low of 99.43 could be in the works.
However, a break above the two immediate forms of resistance at 102.52 would turn attention to the prior heavy resistance at 103.20 where price failed to extend despite the encouraging data and even more hawkish Fed than anticipated. A failure for the price to take over resistance would keep attention on the RSI(5) divergence that favored a further pullback.
D1 Chart Shows DXY Sitting At Support After Overshooting Strong Bullish Channel
Shorter-Term DXY Technical Levels for Tuesday, January 10, 2017
For those interested in shorter-term levels of focus than the ones above, these levels signal important potential pivot levels over the next 48-hours of trading.
T.Y.
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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