Analys från DailyFX
FTSE 100 Bounces Slightly As It Nears Its April Lows
Talking Points
- The FTSE 100 was at the time of writing relatively close to the April low of 6060.
- The short-term trend was bearish below the Tuesday afternoon intraday high of 6210.
- Overnight, the Caixin China PMI Services for April declined to 51.8 from 52.2, which suggests that the Chinese service sector is growing at a slower pace than March.
- A Bloomberg News survey calls for the U.K. Services PMI to have remained sluggish as a decline to 53.5 from 53.7 is expected.
The FTSE 100 (CFD: UK100) had bounced slightly from yesterday’s low at the time of writing, but the FTSE 100 could come under pressure again as the short-term trend was bearish below the Tuesday afternoon intraday high of 6210. The trend is bearish below the intraday high of 6210 as it is a lower high in relation to the April 27 high of 6341.
The FTSE 100 was at the time of writing relatively close to the April low of 6060, the decline to this critical support level having been motivated by strong declines in the Basic Material sector (miners), following softer copper prices. The April low of 6060 is a critical support level as it is the most recent swing low of the bullish bias in place since February. Support levels below the 6060 level are the March 10 low of 6006 and followed by the February 24 low of 5841.
Short-term resistance levels are the Tuesday afternoon intraday high of 6210 and the April 27 high of 6341.
In the first three months of 2016, the U.K. Markit/CIPS UK Services PMI was the weakest since the same quarter in 2013. Today’s projection calls for the Services PMI to have remained sluggish as a Bloomberg News survey expects a decline to 53.5 from 53.7. In the PMI report for March, the new business gauge dropped to a new cyclical low and could potentiality explain today’s expected lower reading. The researchers behind the survey, Markit, said last month that the soft global economy growth, fears of a Brexit and the prospect of further government spending cuts has left business confidence low.
Traders will watch the Services PMI report as it may affect the share prices of FTSE 100 firms and it provides hints as to the next move at the Bank of England. Earlier this week the Manufacturing and Construction PMI failed to meet economist’s expectations and hints of a slowdown in the U.K. economy can be seen. Manufacturing PMI slipped to 49.2 from 50.7 and a reading below 50 hints at a contraction of the sector.
Our Stock Market forecasts for Q2 2016 are now live on the site. Download them for free.
FTSE 100 | CFD: UK100
Created with Marketscope/Trading Station II; prepared by Alejandro Zambrano
— Written by Alejandro Zambrano, Market Analyst for DailyFX.com
Contact and follow Alejandro on Twitter: @AlexFX00
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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