Analys från DailyFX
GBP/USD Levels to Watch Ahead of Yellen’s Speech at Jackson Hole
Talking Points:
– GBP/USD trading above 1.32 after seeing a corrective move lower yesterday
– A break above the 1.3250 area could prove explosive on extremely short positioned market
– Yellen is in focus looking ahead, as December rate hike probability rises
The GBP/USD is trading above 1.32 at the time of writing, as the pair continues to appear supported heading into the major event risk ahead.
The Janet Yellen speech at Jackson Hole is the main event risk on the docket, with the market craving clarity on the Fed’s rate path going forward.
Against this backdrop we will form our outlook and look to find short term trading opportunities using different tools such as the Grid Sight Index (GSI) indicator.
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Revisions to US and UK 2Q GDP are set to hit the wires looking ahead.
The market might discard the UK figures as they represent the pre-Brexit environment.
US Dollar traders might be unlikely to commit directionally on the US GDP figures before Yellen, so unless a significant revision hits the wires, the US Dollar might show a limited response.
This puts the focus on the Janet Yellen speech in Jackson Hole, with the market likely to scrutinize the speech for hints on a potential Fed hike in September.
The probability of a rate hike before year-end implied in Fed Funds futures has increased in the last week.
If Yellen mirrors previous commentary by Dudley and Williams, the US Dollar may trade higher.
However, if Yellen disappoints, a break above the 1.3250 area could prove explosive on an extremely short positioned market.
GBP/USD Technical Levels:
Click here for the DailyFX Support Resistance tool
We use volatility measures as a way to better fit our strategy to market conditions. The GBP/USD has seeing volatility calm lately based on 20-day ATR readings, while implied volatility measures are suggesting a slight pick up down the line.
Taken together this might suggest that the pair’s volatility could remain lower in the short term, with the Yellen speech a potential game changer for this dynamic.
In turn, this may suggest that break out type trades might be appropriate ahead.
GBP/USD 30-Min Chart (With the GSI Indicator): August 26, 2016
(Click to Enlarge)
The GBP/USD is trading beneath a potential resistance level at 1.3225 at the time of writing, with GSI calculating higher percentage of past movement to the upside in the short term.
The GSI indicator above calculates the distribution of past event outcomes given certain momentum patterns. By matching events in the past, GSI describes how often the price moved in a certain direction.
You can learn more about the GSI here, and download the Trade Station version here.
Further levels of resistance might be the area above 1.3250, 1.33, a zone below 1.3350 and 1.34.
Levels of support might be 1.32, 1.3168, 1.3120 and 1.30.
We generally want to see GSI with the historical patterns significantly shifted in one direction, which alongside a pre-determined bias and other technical tools could provide a solid trading idea that offer a proper way to define risk.
We studied over 43 million real trades and found that traders who successfully define risk were three times more likely to turn a profit.
Read more on the “Traits of Successful Traders” research.
Meanwhile, the DailyFX Speculative Sentiment Index (SSI) is showing that about 47.7% of FXCM’s traders are long the GBP/USD at the time of writing.
You can find more info about the DailyFX SSI indicator here
— Written by Oded Shimoni, Junior Currency Analyst for DailyFX.com
To contact Oded Shimoni, e-mail oshimoni@dailyfx.com
Follow him on Twitter at @OdedShimoni
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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