Analys från DailyFX
GBP/USD Levels to Watch Heading Into UK 3Q GDP Numbers
Talking Points:
– GBP/USD trading in the confines of a well-defined range after the British Pound “flash-crash”
– UK GDP numbers headline the economic docket and could see a burst of short term volatility
– Learn good trading habits with the “Traits of successful traders” series
The GBP/USD is trading in the confines of a well-defined technical range (see chart below) after the pound recovered some losses following the October 6 “flash crash”, which sent the British Pound to fresh three-decade lows.
Looking ahead, UK third-quarter GDP numbers headline the economic docket and upbeat figures could help facilitate a larger corrective move by the Sterling.
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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UK Advance 3Q GDP figures are set to hit the wires 08:30 GMT. Expectations are for 2.1% growth in 3Q year-on-year, as the prior figure.
The numbers will represent the first full growth indication of the UK following the Brexit referendum, which could prove significant to understand the state of the economy under the future exit uncertainty.
Upbeat prints may encourage the view that activity in the UK remained better than initially feared, potentially offering a short term boost for the British Pound, especially as the Bank of England might have to endorse a “wait-and-see” approach following the British Pound sharp depreciation, possibly pushing inflation to far from the Bank’s 2% target.
Follow through could prove limited however, as fears from a “hard-Brexit” could still cap British Pound gains.
US September Durable Goods Orders are on the docket as well, and may see a short burst of volatility, but appear unlikely to have significant follow-through as participant might hold back before committing to directional US outlook before the more significant US 3Q GDP data tomorrow.
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 British Pound is still expected to be the most volatile major currency versus the US Dollar based on 1-week and 1-month implied volatility measures after the flash crash, even though the numbers declined significantly.
With that said, 14-Day ATR readings have sunk following the spike higher on the sharp decline, implying that the pair could be capped in a range under current conditions; “wait-and-see” BOE as opposed to “hard Brexit” fears.
GBP/USD 30-Min Chart: October 27, 2016
(Click to Enlarge)
The GBP/USD is trading in a well-defined range between the 1.23 resistance area and the 1.21 handle support, pivoting around the 1.22 handle.
Other support levels to watch might be 1.2150 ahead of the range low.
The major level of resistance in the short term appears to be 1.2250 ahead of the range high.
In the short term, GSI is showing similar momentum patterns moved about an even percentage of past events to either side.
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.
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.
— 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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