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Forex Strategy

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Talking Points

  • EUR/USD Technical Strategy: Upside break prefers longs
  • Absent bearish reversal signal opens up further gains
  • Upcoming NFPs likely to spark break of Asian session range

As noted in yesterday’s report; the ECB rate decision stood to brush aside a number of technical readings on EUR/USD. Following an upbeat growth forecast from the central bank the Euro bulls took charge and pushed the common currency back above the 1.3800 level.

Following the break higher, sellers have emerged at the 1.3865 mark, which coincides with a test of the longer-term downward trend line on the weekly (below). This leaves EUR/USD at a critical juncture.

Intraday action has been lackluster to say the least – with prices consolidating in a narrow 11 pip range during Asian trading. We’re also yet to see a bearish reversal candlestick formation emerge which could hint at declines for the pair. An upside breakout would likely favor a continued advance and fresh multi-year highs.

Again, traders should note that key fundamental event risk looms ahead. One of the most influential data releases of the month, US Non-Farm-Payrolls, is due to cross the wires in the US session, and is likely to spark further volatility for EUR/USD.

Confirm your chart-based trade setups with the Technical Analyzer.

Forex_Strategy_-_EURUSD_Open_to_Breakout_in_Absence_of_Reversal_Signal_body_Picture_3.png, Forex Strategy - EUR/USD Open to Breakout in Absence of Reversal Signal

Hourly Chart – Created Using FXCM Marketscope 2.0

Forex_Strategy_-_EURUSD_Open_to_Breakout_in_Absence_of_Reversal_Signal_body_Picture_2.png, Forex Strategy - EUR/USD Open to Breakout in Absence of Reversal Signal

Daily Chart – Created Using FXCM Marketscope 2.0

Forex_Strategy_-_EURUSD_Open_to_Breakout_in_Absence_of_Reversal_Signal_body_Picture_1.png, Forex Strategy - EUR/USD Open to Breakout in Absence of Reversal Signal

— Written by David de Ferranti, Market Analyst, FXCM

Contact and follow David on Twitter: @Davidde

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EURUSD Weekly Technical Analysis: New Month, More Weakness

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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

EURUSD Weekly Technical Analysis: New Month, More Weakness

—Written by Paul Robinson, Market Analyst

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You can follow Paul on Twitter at@PaulRobinonFX.

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Euro Bias Mixed Heading into October, Q4’17

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Euro Bias Mixed Heading into October, Q4'17

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

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British Pound Reversal Potential Persists Heading into New Quarter

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British Pound Reversal Potential Persists Heading into New Quarter

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

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