Analys från DailyFX
EURUSD Bounces from Important Support, Pattern in View; ECB This Week
What’s inside:
- EURUSD holds 10500 area again
- Big picture bottoming formation still a possibility
- ECB on Thursday
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The Euro lifted over 1% on Friday from an important zone of support which runs back the low created two years ago to the month. EURUSD found support at 10460 in March 2015, but has since turned higher from near there on a couple of occasions since – Dec 2015 (10517) and Dec/Jan 2016 (10504) before briefly dropping down to into the 10300s. Despite the drop to those lows a few months back, the area around 10500 is still in play as a big picture inflection point; Friday’s sharp rally is a testament to the importance of this level.
The area around 10500 is also of particular interest as it could constitute the left and right shoulders of an inverse ‘head-and-shoulders’ pattern. It’s a formation we’ve been discussing in webinars, and could remain on the table if the euro can get into gear soon. Pattern symmetry is beginning to come into question as the right shoulder continues to extend; at some point we would need to consider alternative paths if we don’t see higher prices begin shortly.
The neckline of the formation arrives towards the 10800 handle, falling not far below the trend-line running down off the May 2015 high. If the euro can rally and break the neckline and trend-line, a much broader move higher could unfold towards 11300; a measured move target based on the depth of the inverse HS formation.
In the shorter-term, EURUSD remains stuck in a downward trend since the beginning of last month, a pattern which may be breaking if Friday’s rally can hold and build from here. In the short-term, 10493 will act as the line-in-the-sand; a break below could see a breakdown towards the Jan 3 low of 10340 or worse, and eliminate the beforementioned bullish bottoming formation.
On the docket this week, we have the ECB meeting on Thursday. The central bank is not expected to make any material changes to policy, putting the market’s focus on the press conference with Mario Draghi. On Friday, the U.S. jobs report will be released for February. See the economic calendar for details.
EURUSD: Daily
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—Written by Paul Robinson, Market Analyst
You can receive Paul’s analysis directly via email by signing up here.
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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