Analys från DailyFX
Price & Time: FX Volatility
Talking Points
- Narrowest weekly range on record last week in the Euro
- USD/JPY rebound continues
- Gold nearing key downside pivot
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Foreign Exchange Price Time at a Glance:
Price Time Analysis: USD/JPY
Charts Created using Marketscope – Prepared by Kristian Kerr
- USD/JPY has moved steadily higher since rebounding off the 4th square root relationship of the year’s high at 101.35 earlier in the month
- Our near-term trend bias is lower in the exchange rate while below 103.10
- Interim support is seen at 102.35, but a move under 101.35 is really needed to kick start any sort of meaningful move to the downside
- A very minor cycle turn window is seen on Wednesday
- A daily close over 103.10 would shift our near-term trend bias to positive
USD/JPY Strategy: Short against 103.10.
Price Time Analysis: GOLD
Charts Created using Marketscope – Prepared by Kristian Kerr
- XAU/USD has been under steady pressure since failing mid-month just shy of the 50% retracement of the March to April decline
- Our near-term trend bias is lower in Gold while 1331 remains intact
- The 1276 level is an important downside pivot with weakness below needed to signal a new leg lower in the metal
- The middle of next week is the next material turn window
- Strength over 1331 would turn us positive on Gold
XAU/USD Strategy: Like the short side while under 1331.
Focus Chart of the Day: EUR/USD
To say volatility in the G10 FX space is low at the moment is a bit of an understatement. 1-month implied vol in EUR/USD now routinely trades on a 5 handle. Last week the trading range in the Euro was only about 75 pips (0.5%). This was the narrowest weekly trading range in the exchange rate since the inception of the single currency. On the surface central banks have seemingly succeeded in their quixotic quest to suppress volatility. This has spawned a raging bull market in complacency. Market history and the long-term mean reverting nature of volatility suggest such a high level of complacency cannot go on for very much longer, but the 25,000 Euro question is when will vol start to pick up meaningfully? Our best guess is the second half of this year. Volatility like just about everything else in the markets seems to have a strong cyclical component. With a convergence of several key long-term timing relationships eyed over the 3rd and 4th quarters of 2014 some sort of Minsky type moment looks destined to play out later this year as the markets remind us that nobody is omnipotent – not even our beloved central banks.
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— Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com
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.
To contact Kristian, e-mail kkerr@fxcm.com. Follow me on Twitter @KKerrFX
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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