Analys från DailyFX
NZDUSD May Have Made a Major Top
- EURUSD, GBPUSD, USDCHF weekly momentum considerations
- USDJPY trading difficulty described by a B wave
- NZDUSD top could be major
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Weekly
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-“EURUSD was never able to drop under 1.3642, finding low after NFP at 1.3672. Momentum wise, I am looking for a top. RSI at each top since December has been below 70. This weak momentum profile is not suggestive of a strong bull.” Weekly momentum is just as telling. The most recent top is accompanied by RSI divergence with RSI 60. This is exceptionally bearish. A similar RSI pattern occurred in July 2008.
-1.3909 is possible resistance before the high. If the rate does trade to a new high, then a drop back into the range would be required in order to create a tradable high. It’s worth mentioning that important tops have formed in April/May in recent years. A 1.3750 break would ‘announce’ that a downtrend has commenced.
Monthly
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-GBPUSD upside pressures remain intact. The line that extends off of the November and February lows pinpointed the 3/24 low and a break of the support line would suggest that February’s outside month was exhaustive.
-The momentum profile described regarding EURUSD applies to GBPUSD too. In fact, daily RSI hasn’t been above 70 since the October top. Don’t forget about extreme COT readings.
Weekly
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-AUDUSD made an inside week at resistance from the 2009 high, 2011 low and late November low. Weekly RSI has turned over from near 60, which has been resistance in the indicator since January 2012. This is a good place for a sharp decline if not the resumption of the longer term downtrend.
Monthly
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-NZDUSD completely retraced last week’s advance. I’m treating the April 10th high as a major top.
-Don’t forget about the line that extends off of the 1996 and 2007 highs. That line crosses through the 2008, 2011, and highs as well. In 2011 (record free float high), the rate surged through the line in late July before topping on August 1st.
Monthly
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-USDJPY has bounced from the line that extends off of the February and 3/14 lows. The rally from the February low channels in a corrective manner and makes 104.12 important from a bigger picture bearish perspective.
-There is an Elliott case to be made for a return to the 4thwave of one less degree. The range spans 93.78 to 96.55. Of course, the path to get to that level is far from clear. Resistance extends into 103.05/25.
Monthly
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–Measured objectives from the breakout above the 2011 high range from 1.1680 to 1.1910. The Jul 2009 high rests in this zone at 1.1724 and the 2007 high is near the top of the zone at 1.1875.
-From an Elliott perspective, it’s possible that the rally from the 2012 low composes a ‘3rd of a 3rd (or C)’ wave from the 2007 low.
-Action since the January high may compose a flat. The low at 1.0857 is in line with major inflection points on recent years as well as the 1/13 low (1.0842).
Weekly
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-The same momentum considerations that apply to EURUSD apply to USDCHF (the March price low occurred with RSI above 30). Weekly RSI has been unable to register an ‘oversold’ reading despite the market declining for almost 2 years.
-Patter wise, the decline from the 2012 high ‘fits’ well as a 3 wave correction with wave C as an ending diagonal. When (if) this market turns is up in the air. In the event of new lows, watch .8566-.8640. Above .8844 begins to turn things constructive again.
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
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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
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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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