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Good Countertrend Set-up in GBP/NZD

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Talking Points:

  • Clear Daily Uptrend in GBP/NZD
  • Viable Reasons to Trade Short Instead
  • How to Manage the Entry and Control Risk

GBPNZD is in a clear uptrend on the daily chart (see below), and yet in spite of that, there may be potential for a short set-up that could run as much as 200 pips.

Guest Commentary: Clear Uptrend on GBP/NZD Daily Chart

Good_Countertrend_Set-up_in_GBPNZD_body_GuestCommentary_KayeLee_January9A_1.png, Good Countertrend Set-up in GBP/NZD

Normally, traders don’t want to go against the daily trend, but there are exceptions to every rule of thumb, and one of those exceptions is a break of a trend line. As shown below, this has happened on the four-hour chart of GBPNZD.

The break of the momentum trend line set price up to move down towards the next rising line of support, which is a potential move of up to 280 pips. The resistance area is 72 pips deep, which should provide a more-than-adequate reward for risk.

Guest Commentary: A Viable Reason to Short GBP/NZD

Good_Countertrend_Set-up_in_GBPNZD_body_GuestCommentary_KayeLee_January9A_2.png, Good Countertrend Set-up in GBP/NZD

It is worth noting that because two or three tries at the entry are usually advocated, the actual risk may be less than, or occasionally slightly more than, 72 pips, depending on the way the trigger develops on the hourly chart, which is the trigger time frame in this case.

Similarly, the 280-pip target is precisely that, a target. Although targets are very popular among traders, it is best to regard them as guidelines. There is a real danger in disregarding the price and becoming overly concerned about reward for risk. More to the point, trade management should rule the decision-making process, not any pre-determined price targets.

The hourly chart of GBPNZD (see below) looks ready to turn, having printed a five-wave Elliott pattern that, unfortunately, is not entirely obvious. However, there is a line of support in the way, and that could potentially mean that the first try at gaining an entry could flounder. Nonetheless, it is not the business of traders to predict the market, and thus, it’s best to simply continue to take the trades as they trigger.

Guest Commentary: Trigger Time Frame for GBP/NZD Shorts

Good_Countertrend_Set-up_in_GBPNZD_body_GuestCommentary_KayeLee_January9A_3.png, Good Countertrend Set-up in GBP/NZD

In this case, the triggers would be bearish reversal divergence (which has already formed or is forming now in many indicators), bearish engulfing patterns, and/or pin bars. Stop losses should be placed above these patterns, although more risk-averse traders may select larger stop values.

By Kaye Lee, private fund trader and head trader consultant, StraightTalkTrading.com

Analys från DailyFX

EURUSD Weekly Technical Analysis: New Month, More Weakness

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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

EURUSD Weekly Technical Analysis: New Month, More Weakness

—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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Analys från DailyFX

Euro Bias Mixed Heading into October, Q4’17

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Euro Bias Mixed Heading into October, Q4'17

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

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British Pound Reversal Potential Persists Heading into New Quarter

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British Pound Reversal Potential Persists Heading into New Quarter

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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