Analys från DailyFX
EURUSD Stretching into Resistance, Dampening Rosy Outlook
What’s inside:
- EURUSD rallies to targeted zone of resistance
- Risk for longs is rising, but shorts not warranted yet
- The ‘wrong-side crowd’ could throw in towel and produce a squeeze; FOMC on Wednesday could be a catalyst
Looking for a longer-term view on EURUSD? Check out the Q3 Forecast.
Heading into last week and the ECB meeting we held a bullish outlook for the euro, with eyes for the 2016 high over 11600, and on a push through that level would bring into play the August 2015 high sitting just north of 11700. To close out last week the euro finished between the two eyed thresholds. The path of least resistance is clearly higher, but from a risk/reward perspective chasing the current up-move into resistance without a correction isn’t particularly attractive. At any point here we could at the least see a minor retracement if not something more. However, with that said, when a trend gains as much traction as EURUSD has there is always the risk that we see one side of the market (shorts) throw in the towel, resulting in a sharp squeeze.
We have a catalyst this coming week which has potential to do just that, as the FOMC is set to release its decision on interest rates and policy statement. Rates are expected to remain unchanged, but any material signaling for the September meeting could have a sizable impact on the US dollar. Join us live for FOMC coverage on Wednesday.
If the euro continues to gain steam and breaks the August 2015 high at 11714, the next natural level of resistance doesn’t arrive until the 2012 low at 12041. It seems unlikely, though, such heights will be reached in the coming week – it would be quite the move. Some back-and-forth seems likely to take place prior to Wednesday between ~11600 and ~11700. After that, we’ll have a clearer picture as to how things will unfold.
All-in-all, risk is rising for longs, but shorting without a sharp turn in momentum and failure to recover doesn’t present a very good proposition either.
EURUSD: Daily
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—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.
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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