Analys från DailyFX
EUR/USD Short Term View Ahead of Draghi and Fed Speeches
Talking Points:
– EUR/USD trading above key support at 1.2200 after bouncing higher from its 200 day SMA
– Speeches from ECB’s Draghi and Fed’s Tarullo, Kaplan in focus ahead
– Fed speak could push US Dollar higher on hawkish rhetoric
The EUR/USD is edging higher following the FOMC rate decision, after the pair bounced off its 200 day SMA to trade above a key resistance zone between 1.1180-1.1220.
Looking ahead, monetary policy is back in focus with an economic docket full of key speeches, with Draghi on tap as well.
Against this backdrop we will form our outlook and look to find short term trading opportunities using different tools such as the Grid Sight Index (GSI) indicator.
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ECB’s Draghi is set to speak in the EU Parliament at 14:00 GMT. The market will probably be on the lookout for hints on potential changes to the ECB’s QE strategy implementation as the central bank now looks to “smoothen implementation”, potentially indicative of a change to the current program rules.
Such a dovish lean seems likely to put pressure on Euro-Zone government bond yields and pressure the Euro. On the other hand, if the market sees hints that the ECB might be approaching its limits, the Euro seems likely to find support.
“Fed-speak” is also in focus today, with scheduled remarks by Tarullo and Kaplan. The US Dollar declined following the FOMC rate decision, and it seems the market put more weight on the longer term rates outlook. The Fed lowered their projected rates path but indicated a hike is likely in December.
With that said, December hike probabilities still sit around 54% at the time of writing (according to Fed fund futures), implying that if “Fed-speak” continues to point to December, there is room for US Dollar strength in the short term on rising hike bets.
EUR/USD Technical Levels:
Click here for the DailyFX Support Resistance tool
We use volatility measures as a way to better fit our strategy to market conditions. The EUR/USD is expected to be the least volatile major currency pair and 20-day ATR reading suggest reduced volatility as well.
In turn, this may imply that the longer term range bound conditions might still be more likely.
EUR/USD 30-Min Chart: September 26, 2016
(Click to Enlarge)
The EUR/USD bounced off support around 1.1220 and is approaching the key 1.1250 resistance.
Other resistance levels to watch in the short term might be 1.1275 and the 1.13 handle.
Levels of support may be found at 1.1220, 1.1180, 1.1150, 1.1130 and the big 1.11 handle.
In the short term, GSI is showing similar momentum patterns continued to the downside more often than not.
The GSI indicator above calculates the distribution of past event outcomes given certain momentum patterns. By matching events in the past, GSI describes how often the price moved in a certain direction.
You can learn more about the GSI here.
We generally want to see GSI with the historical patterns significantly shifted in one direction, which alongside a pre-determined bias and other technical tools could provide a solid trading idea that offer a proper way to define risk.
— Written by Oded Shimoni, Junior Currency Analyst for DailyFX.com
To contact Oded Shimoni, e-mail oshimoni@dailyfx.com
Follow him on Twitter at @OdedShimoni
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.
Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.
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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