Analys från DailyFX
NZD/CHF Set-up That’s Common Yet Controversial
Talking Points:
- Broken Trend Line Retest in NZD/CHF
- Key Resistance Zone for Selling the Pair
- Mixed Elliott Wave Signals to Consider First
US non-farm payroll (NFP) Fridays always tend to be days when many traders are afraid to take trades, but since this article is being written after the NFP announcement, that should not present so much of a problem. Currently, the daily chart of NZDCHF is showing an interesting formation, which may signify the end of a short recent trend.
Although this is one of the more common trades in trend line analysis, it is also a pattern that has been relatively rare in recent memory. Hopefully, this signals a shift away from the touch-and-go environment and sideways equity curve we’ve seen over the past two weeks. Although that comes with the territory, no trader would deny that it is among the most boring and sometimes most frustrating parts of trading.
On the below chart, should a retest of the broken trend line materialize, the fall could contain nearly 200 pips of downside just to reach the next rising line of support.
Guest Commentary: Daily Trend Line Retest in NZD/CHF
The four-hour chart below shows a handy resistance area derived from a previous consolidation. This resistance area is 0.7656-0.7695, a 39-pip zone that is somewhat small for a four-hour chart, but considering the possible for 200 pips to the downside, the overall risk profile is certainly inviting.
Guest Commentary: Key Zone for Selling NZD/CHF
The best way to enter this trade would be on the hourly chart (see below) using bearish reversal divergence, pin bars, or bearish engulfing candlestick patterns as viable triggers. As we’ll see, however, Elliott wave purists may raise some questions about the validity of this set-up.
Guest Commentary: Mixed Elliott Wave Signals in NZD/CHF
Although countertrend trading is usually considered more dangerous, the daily chart has clearly broken a line of support, and thus, hypothesising a change in the trend to at least a sideways consolidation on the daily chart is perfectly reasonable. Regardless, though, two or three attempts may still be required to get in on this trade.
As marked on the hourly chart, there has been a five-wave decline, which lends greater credibility to the idea that a downtrend may have begun. The current retracement could well be an A-B-C formation, although Elliott purists would raise multiple objections, particularly with regard to the bullish momentum evidenced in the ‘a’ wave. This should not come as a surprise, however, as NZDCHF was originally in an uptrend.
Regardless of theory, common sense would suggest that there should be a surplus of bullish momentum to be washed out, and as such, an oversized retracement within the downtrend is perfectly acceptable.
By Kaye Lee, private fund trader and head trader consultant, StraightTalkTrading.com
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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