Analys från DailyFX
Forex Markets Choppy
Our sentiment-based strategies have had a difficult week of trading on choppy market conditions, but a view of the forest from the trees leaves us mostly in favor of US Dollar and Japanese Yen weakness.
View individual currency sections:
EURUSD – Euro Chops us Up – Watch the Forest from the Trees
GBPUSD – British Pound Shows Signs of Life, Our Strategies Buy
EURJPY – Japanese Yen Holds Critical Lows but not Likely For Long
XAUUSD – Traders Short Gold for First Time Since January – Bottom in Place
SPX500 – SPX500 Trading Sentiment Points to Record Peaks
AUDUSD – Australian Dollar Trading Bias Favors Losses on Break of $1.02
Weekly Summary of Forex Trader Sentiment and Changes in Positioning
Forex price action has been exceedingly choppy as of late, and our mostly trend-following SSI-based trading systems have done poorly as the Euro, Japanese Yen, and Australian Dollar stick to narrow trading ranges against the US Dollar.
The fact that the majority of retail traders remain long the US Dollar and Japanese Yen leaves us bearish the USD and JPY against major counterparts—with the exception of the Australian Dollar. Yet it’s difficult to call for aggressive EURUSD and USDJPY long positions (or EURJPY, for that matter) as traders show little interest in forcing major breakouts.
FX options markets show volatility prices remain elevated in JPY currency pairs, but low US Dollar volatility expectations warn that current choppiness could continue. In this type of environment we’ll remain nimble, trade with reduced leverage, and try to play the longer-term trends instead of getting sucked into short-term choppiness. Such a strategy leaves us mostly in favor of USD and JPY weakness until further notice.
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— Written by David Rodriguez, Quantitative Strategist for DailyFX.com
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Contact David via
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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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