Analys från DailyFX
Dollar Technical Analysis: Watch USD At This Juncture
Talking Points:
-Dollar Technical Strategy: remaining doubtful of immediate upside potential below 102.95
-Prior Post: Dollar Technical Analysis: DXY Sitting At Trend Support
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The US Dollar has taken a surprising step back as many anticipated the strong move that ended 2016 would carry through in early 2017. However, we have since seen a pull-back that is worth watching as a deeper setback could cause many of the long positions to bail out on the trade, which could have the effect of removing short-term support for USD.
This pullback in early 2017 does not mean that there is not still encouraging upside for USD over the medium- and long-term vs. other weak currencies like the British Pound, but short term caution remains warranted. The Dollar Index remains out of short-term favor in the second week of trading for 2017 as shown by the price trading at new lows for 2017, and even breaking below the December 14 low when the Federal Reserve raised interest rates by 25bps and increased the median dot plot by 25bps. A key theme we’ve been watching that has provided a leading indication of currency strength and weakness has been sovereign yield spreads, which has narrowed recently at UST 2yr yields fall from ~130bps to near ~115bps. The breakdown has led the USD lower.
DXY trading between the second half of Q3 2016 to today has remained well within the price channel on the chart below drawn with Andrew’s Pitchfork. The handle is drawn off an extreme momentum low in early June. You can also see that the late December price action rubbed against the top of the channel before breaking down, which now turns our attention to the bottom of the rising channel near 100.00/50 to see if we get a strong bounce. If we do, we can assume that the strong trend in USD is resuming.
However, if we fail to move higher off the channel support, there could soon be a strong break below the December low of 99.43. It would have been difficult to imagine questioning the uptrend a few weeks ago, but we find ourselves asking if the market went “too far, too fast.” For now, we’ll anticipate a bounce, and trend resumption given the divergence between Central Banks.The bounce view would be validated on a move through the 102.95 high on Wednesday.
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D1 Chart Shows DXY Sitting At Channel Support, Breakdown from Here Is Worrisome
Shorter-Term DXY Technical Levels for Thursday, January 12, 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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