Analys från DailyFX
GBP/USD Technical Analysis: Morning Star Bounces Off of Eight-Week Lows
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Talking Points:
– The British Pound is clawing back from a fresh eight week low set just last week. Are we seeing a legitimate bullish reversal, or is price action in the process of making that next ‘lower high’? There are setups on both sides here, as we discuss below.
– IG Client Sentiment is currently +1.0715, as of this writing.
– Want to see how GBP/USD has held up to the DailyFX Q3 Forecasts? Click here for full access.
The British Pound has been on quite the rollercoaster so far in 2017. After coming into the year wrapped-up in Brexit worries, the pair began to show bullish tendencies as the prospect of rising inflation became more real. Inflation for the month of May perked all the way up to 2.8%, giving ammunition to bulls under the premise that the BoE might be forced away from their uber-dovish monetary stance. But after inflation came-in a bit tamer in June and July, those concerns began to recede into the background and when the Bank of England met earlier in the month of August, it appeared that those worries were ready to fade to black.
In our last article, we looked at the bearish move in GBP/USD after the pair had broken-below the 1.3000 level. The British Pound was rather strong coming into August, but after the Bank of England’s Super Thursday on the second trading day of the month saw the bank insert another dovish set of comments, the pair had been sliding-lower as we came into last week’s Jackson Hole Economic Symposium. As we neared the start of the event, GBP/USD moved-down to a fresh six-week-low at 1.2774. But as we heard from Chair Yellen and Mario Draghi on Friday, another gust of USD-weakness took over, and GBP/USD began to rally off of last week’s lows. This produced a morning star formation that, at least so far, has led to bullish continuation up to a key zone of resistance. The price of 1.2928 is the 50% Fibonacci retracement of the most recent bullish move, taking the June low up to the August high; and 1.2960 is a batch of swing-lows that had developed after the initial re-break below 1.3000.
GBP/USD Daily: Morning Star Formation Sets on Wednesday, Thursday and Friday
Chart prepared by James Stanley
From here, the door can be opened on either side of the trade. Given that last week led to a fresh low, traders can look for a ‘higher-low’ to form below the previous swing-high around 1.3008, or the 38.2% retracement, for a bearish continuation thesis.
The long side of the setup would be a bit more new given that this low showed-up just last week, so traders may want to wait for a bit of confirmation before looking to press this side of the pair. But in the bullish side of the camp we have a cup and handle formation on the hourly chart that’s just seen a top-side breakout above the handle. This further exposes the 50% Fibonacci retracement at 1.2928, and for those looking to entertain a bullish posture, a sustained break above this level could make the bullish continuation thesis appear a lot more attractive. If prices are able to ascend above this area of resistance, traders can then look for support to show at this level for topside continuation. We had previously discussed how traders can utilize price action to confirm support or resistance around trend changes, and this is what traders would want to look for here if playing the bullish side of Cable.
GBP/USD Hourly: Fresh Two-Week Highs After Bullish Breakout from Cup (blue) Handle (orange)
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.
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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