Analys från DailyFX
FTSE 100 Softens More than Was Suggested by Commodity Markets
Talking Points
- The biggest drag on the FTSE 100 total returns over the last week is the Basic Materials sector, which again highlights the link between the FTSE 100 and commodities.
- The technical trend for today is neutral to bullish above the 5866 low, bearish below.
- Fair-value-model using the Bloomberg Commodity index suggests that the FTSE 100 should be trading closer to 5980.
- Caixin China PMI Services Rises, U.S. ISM and ADP on deck this afternoon.
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Unsurprisingly, the biggest drag on the FTSE 100 total returns over the last week is the Basic Materials sector, with median shares losing 2.59% of their value. The median Consumer Goods sector shares have risen by 3.98% over the same period and is by far the strongest sector.
This highlights the particular link between the FTSE 100 and commodity prices, which are once again under pressure. This has caused the FTSE to slide below last Thursday’s low of 5887 and by doing so has potentially ended the bullish rally that was started on January 20.
The technical trend for today is neutral to bullish above the January 27 low of 5866. The FTSE may recuperate some of yesterday’s losses and reach the psychological level of 6000, while a break to 5866 should make it relatively straightforward for the index to reach the January 26 low of 5771.
My fair-value-model using the Bloomberg Commodity index suggests that the FTSE 100 is slightly oversold and should be trading closer to 5980, while the FTSE’s correlation to the DAX 30 suggests it should be trading at 5917 (in other words the FTSE 100 is in line with the DAX 30 at current levels).
Caixin China PMI Services Rises
A strong bounce in the Caixin China PMI Services takes it to 52.4 from 50.2, Japan PMI Services rose to 52.4 from 51.5, while German PMI Services declined to 55 from 55.4. These reports are strong and stock market supportive.
U.S. ADP and ISM Services on deck this afternoon and key for stock markets, the former is expected to print 193K according to a Bloomberg News survey, while the latter is expected to soften to 55.1 from 55.3.
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FTSE 100 | FXCM: 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
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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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