Analys från DailyFX
GBP/USD Technical Analysis: Breakdown, Key Support in Sight
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Talking Points:
- GBP/USD Technical Strategy: Intermediate-term – congested; short-term – bearish breakdown.
- Cable has just broken below a key trend-line, resolving a range that had built for most of February in the pair.
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In our last article, we looked at the continued congestion in Cable after GBP/USD had just broken-up to a fresh two-week high. But as we warned, sellers had come in at a key level around 1.2550, and buyers would likely want to wait, at the very least, until a break of the resistance level at 1.2582 took place before pressing bullish continuation strategies.
Since then, price action in the British Pound has broken down. Shortly after last week’s article, Cable settled back-down to prior area of support around 1.2400, and over the past 24 hours, a strong-run in the U.S. Dollar has elicited a breach of that prior batch of support. But just as we wanted to tap on the breaks for bullish continuation last week, traders may want to proceed with caution if investigating down-side continuation strategies, at least for now, as a key support level around 1.2250 sits just underneath current price action.
Chart prepared by James Stanley
The reason to temper that excitement is that the long-term chart on GBP/USD remains considerably oversold, with price action continue to run near 30-year lows. So while the prospect of continued down-side might seem attractive on shorter-term charts, continued moves-lower could elicit new buyers as Cable tests historic. For those looking to voice USD-strength strategies, there are likely more attractive areas to watch, at least with a longer-term vantage point.
Chart prepared by James Stanley
For those that do want to move forward with shorter-term vantage points, a break of the key support zone at 1.2250 could open the door for near-term breakout strategies. For such an approach, traders would likely want to look to prior levels of interest to factor-out profit targets for such positions. Below, we take a look at a few zones of interest.
Chart prepared by James Stanley
— Written by James Stanley, Analyst for DailyFX.com
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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
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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
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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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