Analys från DailyFX
GBP/USD Technical Analysis: Cable Shoots Higher off of Fibonacci Support
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Talking Points:
- GBP/USD Technical Strategy: Flat
- GBP/USD confirms the higher-low established yesterday with a vigorous bounce off of Fibonacci support.
- With headline risk looming, traders should take caution; but should USD-weakness become a prominent theme, GBP/USD will likely be one of the more attractive ways to go short USD.
It’s been a rollercoaster type-of-week for UK data already, and price action in GBP/USD has been moving along with the prints. On Tuesday inflation printed flat and GBP sold off on diminished rate-hike hopes; and on Wednesday, wage growth came in at 2.9% annualized to re-fire those hopes for future inflationary pressure. The Sterling reacted near-immediately to these inflationary indications, selling off on Tuesday to find support on the 50% Fibonacci retracement of the ‘secondary move,’ taking the financial collapse low of 1.3500 to the July 2014 high of 1.7190; only to rocket higher on the back of brisk wage growth printed this morning.
Near-term resistance has come in at 1.5500 on the Cable, which is the 50% retracement of the most recent major move, taking the May low in the pair up the June high (and indicated on the below chart with dashed-gray lines). This is a confluent level of resistance as it’s also a ‘major psychological level’ that will often have a tendency to bring new buyers or sellers into the market. Continued movement above 1.5500 confirms the bullish bias in the pair, and targets could be sought at 1.5567 (38.2% of the tertiary move, taking the high from July of 2014 to the low in April of this year), 1.5600 (confluent resistance as a psychological level is 8 pips away from the 38.2% retracement of the most recent major move), and then 1.5730 (23.6% of the most recent major move).
On the other side of the market, short positions could become attractive with continued resistance showing in the 1.5500 neighborhood. With that type of stance, traders could look for breaks back below the 1.5410 area to highlight the potential for down-trend continuation, at which point 1.5345 (50% of the secondary move), 1.5308 (23.6% of the ‘master move’ of the 2007 high at 2.1160 to the financial collapse low of 1.3500), and then 1.5185 (23.6% of the tertiary move).
Written by James Stanley of DailyFX; you can join his distribution list with this link, and you can converse with him over Twitter @JStanleyFX.
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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