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Price & Time: An Important Day for the Markets

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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.

Foreign Exchange Price Time at a Glance:

EUR/USD:

PT_key_day_body_Picture_4.png, Price amp; Time: An Important Day for the Markets

Charts Created using Marketscope – Prepared by Kristian Kerr

EUR/USD has rebounded further since finding support last week at the 50% retracement of the month-to-date range in the 1.2970

While below the 1.3200 4th square root progression of the year-to-date low our broader bias has to remain lower in the euro

-The 38% retracement of this month’s range in the 1.3025 area is near-term support but 1.2970 remains a critical near-term pivot with weakness below needed to signal the resumption of the broader decline

-A cyclical turn window related to the all-time extremes in the single currency remains in effect

-The 1×1 Gann angle line drawn from the year-to-date high in 1.3085 area is important resistance, but only traction over 1.3200 on a closing basis turns us position on the exchange rate

Strategy: We were expecting some final strength into this turn window. It should be a fade if we are correct about a broader top forming here.

NZD/USD:

PT_key_day_body_Picture_3.png, Price amp; Time: An Important Day for the Markets

Charts Created using Marketscope – Prepared by Kristian Kerr

NZD/USD reversed last week from the 61.8% retracement of the March to April advance in the .8355 area

-Subsequent strength through the 50% retracement of the late April decline in the .8525 area has us leaning higher, but a close over this level is really need to confirm the integrity of this latest move higher

-Near-term cycle analysis suggests scope for a minor turn over the next couple of days

-Weakness below the 38% retracement (resistance turned support) of the late April advance in the .8480 area would undermine burgeoning positive technical structure

-However, only weakness under .8355 indicates that a broader top is in place

Strategy: Wary of chasing Kiwi strength here given the cyclicality across other markets.

USD/CHF:

PT_key_day_body_Picture_2.png, Price amp; Time: An Important Day for the Markets

Charts Created using Marketscope – Prepared by Kristian Kerr

USD/CHF has come under steady downside pressure since finding resistance at the 78.6% retracement of the March to April decline in the .9500 area

Our bias is still higher in the dollar, but strength over .9500 is needed to signal the start of a more important leg higher

-Near-term focused time cycle analysis indicates a minor turn could be seen in the next couple of days

-The 1×1 Gann angle line drawn from the year-to-date low in the .9330 area is important support

-Weakness below the 4th square root progression from this year’s high near .9200 is really needed to turn us negative on the exchange rate

Strategy: Price action over the next few days will be important in determining the direction of the next meaningful move in the rate.

Focus Chart of the Day: Dow 30

PT_key_day_body_Picture_1.png, Price amp; Time: An Important Day for the Markets

As we noted last week, the first half of this week is an important time for the markets from a cycle perspective. A host of different time relationships in a variety of instruments are all converging around the next few days. Such “cycle confluences” are rare and more often times than not mark important turning points. The turn window looks particularly important to us for the US equity markets. With the indices trending strongly of late (in our opinion too much so given the concave nature of the ascent) and positive sentiment elevated and bordering on complacent the conditions seem ripe for a turn. In the sometimes bizarre world of cycle analysis, new highs during this time will actually be a negative for the market as that increases the possibility of a top. We will be looking closely for divergences among the SPX, Dow, Russell 2000, NYSE Composite and NASDAQ Composite over the next few sessions as such behavior is usually one of the early warning signs at the onset of a topping process. We should note that if the indices can somehow manage to circumvent the cyclical turn window and continue their advances unimpeded then that would be a very strong indication of more equity strength to come in the weeks and probably months ahead.

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

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

Are you looking for other ways to pinpoint support and resistance levels? Take our free tutorial on using Fibonacci retracements.

Need guidance managing risk on trades? Download the free Risk Management Indicator.

To receive other reports from this author via e-mail, sign up to Kristian’s e-mail distribution list via this link.

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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

Confidence is essential to successful trading, see this new guide – ’Building Confidence in Trading’.

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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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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