Analys från DailyFX
GBP/USD Elliott Wave Pattern Clears Up
Today’s monster rise in GBP/USD clears up its technical pattern. From a big picture perspective, we have been anticipating a meaningful and long term top to form near the neighborhood of 1.3450. We previously wrote in our Q3 GBP forecast “our model suggests 1.3450 may be strong enough to contain prices over the coming quarter.” Today’s rise adds another wave relationship to the 1.3450 camp to make that level even stronger, should prices arrive there.
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We are interpreting this current wave higher to be an ending wave at two degrees of trend. If correct, this implies a large reversal is lurking nearby within the next couple hundred pips. If GBP/USD makes it to 1.3450, be on the lookout for a reaction lower.
For those Elliott Wave nerds, and those wanting to learn more on this analytical method, let us get technical.
We appear to be in a ‘Y’ wave of a W-X-Y complex upward correction. Wave ‘Y’ began on April 7, 2017 and is constructed of three waves labeled circle a-b-c.
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“Y” Waves
We explained in our last GBP article how this ‘Y’ wave was determined to be an ending wave. That analysis is still the higher probability count.
For those unfamiliar with Elliott Wave Theory, ‘Y’ waves are three wave moves. We can count a zigzag pattern, which is a three wave move, from April 7 to current. In this zigzag, it appears to be subdividing as 5-3-5 (impulse-running flat-impulse).
Harmonized Waves in the Flat
My recent radio silence on GBP/USD was due to losing its scent once the pair broke 1.3247 in early August. As it turns out, the early August break higher was a (b) wave of a small flat correction. B waves in flats tend to be sucker waves and a false breakout. This one fit the bill as the breakout above the May 2017 high was proven temporary. Now, the range that developed between May and August maps out well as a running flat.
Within the (a)-(b)-(c) flat pattern, the (b) wave is an equal wave pattern and the (c) wave is equal in length to wave (a). My point is there is harmony within this pattern that I was missing earlier, causing me to be thrown off the scent. For those keeping score at home the circle wave ‘b’ is a running flat.
What’s next?
When looking at the intraday chart above, we are waiting for the impulse wave from August 24 to end. It appears we are getting ready to finish wave iii of v so the intraday pattern is appears incomplete to the upside.
Since there are strong wave relationships near 1.3450, the fifth and final wave may end in that price zone. We will monitor this closely for signs of exhaustion.
This is a big pattern that once it completes, we are anticipating for a reversal to work back towards 1.19. Of course, this is predicated on the correct analysis of the Elliott Wave pattern.
—Written by Jeremy Wagner, CEWA-M
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Copper Prices Fall 3.5% Today – Beginning of a New Down Trend?
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
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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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