Analys från DailyFX
Momentum Scorecard: Improving Growth Prospects Support EUR/CHF Gains
Economic data across Europe has been improving in recent months, with the 2Q’13 Euro-Zone GDP figure turning positive for the first time since late-2011. With bond yields remaining low, the shift in Euro-Zone fundamentals continues to ease the ‘safety’ role filled by the Swiss Franc. Accordingly, with technical momentum shifting bullish, there’s a case to be made for a strong EURCHF through the end of August.
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TREND IN FOCUS: EURCHF (D1)
– The EURCHF has the highest bullish score among the pairs tracked in this report at +2.86. Conversely, the most bearish pair at present time is the GBPNZD at -2.14. Given recent British Pound strength, the EURCHF long trade is preferred.
– Daily RSI broke the downtrend off of the May and July highs on Tuesday.
– Daily Slow Stochastics (5,3,3) broke through the 50 level for the first time since early-July.
– Most importantly, the Symmetrical Triangle governing price action since March broke higher on Tuesday.
– The bullish shift is confirmed now that the EURCHF has traded above the three EMAs used, and there is full bullish time frame continuity with the 8-EMA 21-EMA 55-EMA.
– Price is approaching the early-July resistance zone at Sf1.2430/65; but a break is unlikely on the first attempt as the daily Slow Stochastics (5,3,3) have already peaked into overbought territory.
– Accordingly, I will be looking to ‘buy the dip’ on any pullback or consolidation seen so long as price holds above the 8-/21-/55-EMA structure.
Read more: British Pound Gains After Retail Sales, Dollar Down Overnight; US CPI Ahead
*Trend definitions: “uptrend” is defined as 8-MA21-MA55-MA; “downtrend” is defined as 8-MA21-MA55-MA; a “trendless” market occurs when continuity is absent.
*Scoring methodology: there are seven time frames, ascending from m15 (15-minutes) to W1 (one-week). In ascending order, each pair is assigned a value from -7 to +7 based on the trend apparent on the specified time frame (I.E. a m15 uptrend equals +1, whereas a H1 downtrend equals -3). If neither an uptrend nor downtrend is present, the trendless timeframe receives a score of 0. These points are totaled and the average is reported on the right. The strongest uptrend would achieve a score of +4.00, while the strongest downtrend would achieve a score of -4.00.
— 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.
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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