Analys från DailyFX
Entering the AUD/USD Pullback Is All About Timing
Talking Points:
- AUD/USD remains on a long term downtrend
- The daily Aussie chart lacks directional bias
- Wait for a break of support or resistance before entering the trade
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There has been no question that the Australian Dollar is trading in a long-term downtrend against the US Dollar since the pair broke below the 2.5 year low in June of 2013. AUD/USD then continued to set new 3-year lows in January 2014, but only after posting a healthy 50% pullback of the original move lower. However, with a second pullback of the downtrend underway, traders must now consider if and when to enter the possible continuation of the downtrend.
AUD/USD Weekly: February 27, 2014
Looking at a daily chart, we see that when the Aussie broke out of the second leg of the downtrend, the pair continued to trade in a less shallow downtrend around the start of the New Year. But that down trend was also broken earlier this month, when a period of sideways trading unconvincingly brought the pair above the upper channel.
AUD/USD Daily: February 27, 2014
Although AUD/USD continues to trade above the upper trend channel, the pair tested and failed to break above the 2-month high at .9086, which may scare traders away from trying to place bets on AUD/USD rising further. On a 4 hour chart below, we also find an upward trend line from early February that may continue to provide support, and the 2-month high at .9086 in January may continue to provide resistance.
AUD/USD 4-Hour: February 27, 2014
Traders looking to short the Aussie against the greenback should wait for a convincing daily close below support by the upward trendline, while those expecting a further pullback to the long-term downward trendline from the weekly chart should wait for a daily close above the January high.
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Chart created by Benjamin Spier using Marketscope 2.0
— Written by Benjamin Spier, DailyFX Research. Feedback can be sent to bbspier@fxcm.com .
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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