Analys från DailyFX
GBP/USD Technical Analysis: Bullish Continuation Seeks Higher-Low
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Talking Points:
– GBP/USD Technical Strategy: Mixed longer-term, bullish short-term.
– GBP/USD rallied over the vaulted 1.3000 psychological figure, albeit temporarily, after Mark Carney warned of potential rate hikes, signaling a shift within the BoE as inflation continues to run-higher in the U.K.
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Last week, we looked at what appeared to be the initial makings of bullish price action in GBP/USD. And if this comes at somewhat of a surprise, that is understandable, as the British Pound has been ruthlessly offered-lower since last year’s Brexit referendum. Around the referendum, the Bank of England took on an extremely dovish approach, worried that the unprecedented risks around the divorce from the EU by the U.K. would roil the British economy. This hasn’t happened yet, but what has taken place is rising inflation after the ‘sharp repricing’ in the British Pound after Brexit was followed by this extreme-dovish stance from the Bank of England.
In June, we saw the Bank of England vote 5-3 to hold rates flat, but the fact that three MPC members dissented in favor of a rate hike gave the idea that the BoE may be nearing capitulation on their post-Brexit dovish stance. This shift is a clear response to the 2.9% inflation print from May that was released just ahead of that rate decision, and then last week saw the head of the BoE, Mr. Mark Carney, make similar remarks, warning that rate hikes may be on the horizon for the U.K.
This has the makings of bullish continuation in the British Pound as the BoE appears to be in the early stages of a more-hawkish shift, and the technical picture echoes this potential for an extension of bullish price action after last week’s burst-higher drove prices above the 1.3000 psychological level. On the hourly chart below, we’ve applied a Fibonacci retracement in the effort of finding where support may show-up for bullish continuation strategies. The ~50 pip area that runs from the 50% retracement at 1.2809 to the 38.2% retracement at 1.2861 is particularly interesting for such an approach. Support in or around this region can open the door for topside entries with stops applied below the prior swing-low at 1.2792.
GBP/USD Hourly Chart with Fibonacci Retracement and Potential Support Zone Applied
Chart prepared by James Stanley
— Written by James Stanley, Strategist 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
You can receive Paul’s analysis directly via email bysigning up here.
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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