Analys från DailyFX
FTSE 100: Bounce or Beginning of a Sustainable Advance?
What’s inside:
- The FTSE 100 springs to life after failing to sustain trade below previous record peaks
- The index is working on a higher high in the short-term, breaking the downtrend off the highs
- Watching how pullback develops and support is treated should it get tested
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Last week, after three days of attempting to make a lasting break below prior record highs the FTSE 100 sprang to life to end the week. On Thursday, sterling took a hit following the BoE meeting, which helped give the footsie a lift (FTSE vs. GBP 1-mo correlation = -91%). More currency weakness very likely means more stock market strength and in reverse if sterling rallies. At least that is what the correlation is telling us. But relationships between markets often change without notice, even if only a short-term derailing, so let’s look at the footsie in a bubble.
Looking out over the short-term the 100 index is working on making a higher high above the swing high (7206) created during the bounce towards the end of January. This would be the first breakage in the near-term downtrend, back in line with the broader uptrend. A shallow dip soon would be welcomed. We will have an opportunity on weakness see how market participants want to treat the current advance; bounce or beginning of a sustainable rally.
The October intra-day high of 7130 down to the Thursday low of 7093 is the zone of support the market needs to hold for now. Again, preferably we don’t see such a deep pullback if the market is to trade higher. But should we see decline begin to unfold, the area around 7100 needs to hold to stave off any notions of the current move higher acting as nothing more than a bounce.
We don’t expect the market to trade higher in the same extremely persistent fashion as it did from the beginning of December to the middle of last month. Those kind of market moves aren’t commonplace. Market conditions are expected to be more on the side of choppiness for now, regardless of its direction.
FTSE 100: Daily
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—Written by Paul Robinson, Market Analyst
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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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