Analys från DailyFX
Global Selling Persists but Yen Eases; Pound Down Before Carney
INTRADAY PERFORMANCE UPDATE: 09:35 GMT
Dow Jones FXCM Dollar Index (Ticker: USDOLLAR): +0.28% (+0.16%prior 5-days)
ASIA/EUROPE FOREX NEWS WRAP
The Dow Jones FXCM Dollar Index is scrapping back some of its losses yesterday and now appears to be forming a minor Bull Flag on the daily chart. Whereas the Australian Dollar, the British Pound, and the Euro have all been cooperating with the US Dollar’s attempt to strengthen, the simple demand for liquidity amid risk-aversion has prevented any such progress against the Japanese Yen.
Today, the USDJPY has started to take back some of its losses from Tuesday, but gains have been limited as pressure on emerging markets remains. It seems that a negative feedback loop is setting in, driving down investor sentiment and exacerbating stress in markets around the world:
Certainly, the global selloff has hardly reached the European currencies, which have turned into a near-term safe haven of sorts amid turmoil in the commodity currency complex. But the British Pound today especially is vulnerable to a setback.
Bank of England Governor Mark Carney will give his first policy speech today, and in light of recent price action in the British Pound and UK Gilts, we are expecting a dovish tone to be struck. In the Quarterly Inflation Report (QIR) released earlier this month, economic “circuit breakers” were identified that would signal a wind down of the BoE’s easing program.
While the initial commentary from Governor Carney may prove to be dovish, it will take a concerted shift in his policy stance – even more dovish – in order for the desire effect to be achieved: softer UK yields. Accordingly, barring an overtly dovish tone, it is possible that the Sterling sets up an opportunity to buy the dip later today.
GBPUSD 5-minute Chart: August 27 to 28, 2013 Intraday
Taking a look at European credit, bonds are relatively unchanged although pressure on the periphery is still apparent – at least on the Iberian Peninsula. The Italian 2-year note yield has decreased to 2.000% (-0.8-bps) while the Spanish 2-year note yield has increased to 1.801% (+3.7-bps). Likewise, the Italian 10-year note yield has decreased to 4.437% (-1.0-bps) while the Spanish 10-year note yield has increased to 4.506% (+3.1-bps); higher yields imply lower prices.
Read more: FX Headlines: British Pound at Risk with Carney’s Speech Looking Dovish
ECONOMIC CALENDAR – UPCOMING NORTH AMERICAN SESSION
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FX TECHNICAL ANALYSIS – CHART OF THE DAY
GBPUSD (H4) – The advance off of the July 9 low (yearly low) remains intact although a potential Bearish Rising Wedge is threatening the advance. The wedge breakdown began on August 21 and is approaching a confluence of support:
– Resistance turned support near 1.5425/30;
– and channel support (off of the July 9 and August 1 lows) at 1.5410/20.
– With the H4 RSI already in oversold territory, any additional selling pressure could be stunted.
– A ‘dip then rip’ scenario could occur in the GBPUSD if Governor Carney’s speech today follows a similar template to the reaction following the QIR.
— Written by Christopher Vecchio, Currency Analyst
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
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
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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