Analys från DailyFX
GBP/CAD Set-up with Plenty of Confirmation
Talking Points:
- Pullback in Daily GBP/CAD Uptrend
- Flat Consolidation Pattern on 4-Hour Chart
- Awaiting Long Signals on Hourly Chart
After a challenging week thus far, select currency pairs are offering set-ups in this choppy market. For example, GBPCAD appears to be pulling back within a daily uptrend and may present a reasonable basis for initiating new long positions.
The daily chart below shows that GBPCAD is just reaching a rising line of support, which may well provide at least a reaction, if not a continuation of the overall uptrend. Nonetheless, lower time frames will have to be analyzed in order to identify support more specifically.
Guest Commentary: Pullback in Overall GBP/CAD Uptrend
On the four-hour chart below, GBPCAD is potentially creating a flat consolidation after a recent five-wave move up. Elliott wave novices are probably more familiar with the ”zig-zag” pattern, but given how price has neatly created two nearly identical highs, there is a significant probability of a flat consolidation developing here instead.
Guest Commentary: Flat Consolidation Pattern in GBP/CAD
With that in mind, a support zone has been identified at “c” as 1.8301-1.8392. This represents a risk zone of 91 pips, which is sizable, but still acceptable for pairs involving the British pound (GBP). However, in order to reduce risk exposure on this trade, the hourly chart (see below) is the desired trigger time frame.
The hourly chart shows more promise for this trade as it develops into what is admittedly a rather broad ending diagonal pattern. There have been four waves to this move already, and the fifth is now developing.
The key support zone has already been contacted, albeit only briefly, but nonetheless, a pin bar or bullish engulfing pattern, or bullish reversal divergence, which is likely to develop at the top of the hour with many indicators, would signal a viable long-entry opportunity. The usual advice about taking perhaps two or three tries at a potential entry applies here as well.
Guest Commentary: Awaiting Long Signals in GBP/CAD
GBPCAD could move in excess of 200 pips to the upside, although admittedly, the overall risk profile is not quite ideal. Then again, this trading environment is far from ideal, but as we’ve said, the best response to such trying market conditions is to continue to take trades, albeit cautiously and in strict accordance with one’s own proven trading plan.
By Kaye Lee, private fund trader and head trader consultant, StraightTalkTrading.com
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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