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Price & Time: A Real "Death Cross" in the Euro?

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This publication attempts to further explore the concept that mass movements of human psychology, as represented by the financial markets, are subject to the mathematical laws of nature and through the use of various geometric, arithmetic, statistical and cyclical techniques a better understanding of markets and their corresponding movements can be achieved.

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Foreign Exchange Price Time at a Glance:

USD/JPY:

PT_death_cross_body_Picture_4.png, Price amp; Time: A Real Death Cross in the Euro?

Charts Created using Marketscope – Prepared by Kristian Kerr

  • USD/JPY broke above a confluence of Gann and Fibonacci levels in the 98.50/70 area to trade to its highest level in three weeks
  • Above 96.75 our trend bias is positive on the exchange rate
  • Traction over the 6th square root progression of this month’s low and the 61.8% retracement of the May to June decline in the 99.50/70 area is needed to setup the next important leg higher
  • The 5th square root progression of the June low at 97.75 immediate support
  • However, only weakness below 96.75 undermines the immediate positive technical structure and turns us negative on the rate

Strategy: Like holding long positions in USD/JPY while over 96.75

NZD/USD:

PT_death_cross_body_Picture_3.png, Price amp; Time: A Real Death Cross in the Euro?

Charts Created using Marketscope – Prepared by Kristian Kerr

  • NZD/USD has struggled higher over the past few days with the advance so far unable to overcome a convergence of Gann resistance in the .7845/60 area
  • Our trend bias remains lower in the Kiwi with clear strength above the 2nd square root progression of the last week’s low near .7860 needed to signal a more meaningful trend shift
  • Cycle studies are a bit unclear though a minor turn window is seen at the start of next week
  • Back under .7700 exposes key long-term support at .7595
  • A close below the latter of which is needed to signal the start of another more important decline

Strategy: Not our favorite chart at the moment. We remain wary of a more forceful counter-trend advance as we near longer-term support levels. That said, the Bird may be worth a punt on the short side against .7845/60 with a very tight stop.

Gold:

PT_death_cross_body_Picture_2.png, Price amp; Time: A Real Death Cross in the Euro?

Charts Created using Marketscope – Prepared by Kristian Kerr

  • XAU/USD broke below a key time and price support zone at 1270 on Wednesday which prompted an acceleration lower to its lowest level since August of 2010
  • Our trend bias is lower with key support now eyed around 1165/55
  • Cycle studies have turned negative following this week’s break of important ‘time support’ though a few Gann relationships here and near the middle of July urge caution around these time periods
  • The 1×3 Gann angle line of the October high near 1246 is immediate resistance
  • However, only aggressive strength back above 1301 alters the negative structure in Gold and turns us positive on the metal

Strategy: Like the short side following Wednesday key break, but not at these levels.

Focus Chart of the Day: EUR/USD

PT_death_cross_body_Picture_1.png, Price amp; Time: A Real Death Cross in the Euro?

With the 50-day simple moving average nearing and threatening to cross below the 200-day in coming sessions the technical world has quite predictably begun to hear a steady chorus claiming that a major change in trend is materializing in the Euro as a so called “death cross” is about to be triggered. We are not big proponents of moving average crossover strategies and only look at such developments with a casual interest. However, we will note that most of the time that we hear such claims of a death cross they are usually wrong. A true death cross (as were taught it) requires both moving averages to be sloping lower and getting both to do so is actually a pretty rare occurrence. In this case it does look to be a bona fide death cross as the 200-day moving average begun to slope lower earlier this week. In our experience this extra variable does actually help improve the efficacy of the signal. Now would we go and short euros when it does cross? Of course not, but with our longer-term cycles studies turning negative on the single currency here – it is supporting evidence of a broader shift.

Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com

To contact Kristian, e-mail kkerr@fxcm.com. Follow me on Twitter @KKerrFX

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

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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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