Analys från DailyFX
Price & Time: GBP/USD
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Talking Points
- Important time retracement looming in the pound
- Historical positive seasonality after the middle of September
Unfamiliar with Gann Square Root Relationships? Learn more about them HERE
GBP/USD: Seasonality vs. Symmetry
The failure last week in GBP/USD around 1.5660 was pretty much a Gann disciple’s dream as it occurred at a convergence of the 4th square root relationship of the month-to-date low and the 1×1 Gann angle line of the July 2014 high. All in all this price action keeps the pound on the back foot and continues to warn that the broader downtrend in place since the summer of last year is slowly but surely trying to reemerge.
A big part of this broader negative view is centered around the symmetry exhibited at the June and August peaks in Cable as the June highs materialized at the 25% retracement in time (calendar days) of the July 2014 – April 2015 decline while the August one occurred at the 50% retracement in time of this same move. Such clear symmetry in time is usually a hallmark of something more important.
That all said, I see plenty of potential hurdles coming up that could derail an immediate downside resumption. The first is the upcoming autumnal equinox and the seasonal propensity for sterling strength thereafter. When you look at currency seasonal patterns over the last 30 years or so a few key periods stick out and one of them is general dollar weakness starting at the end of the 3rd quarter and continuing on into the end of the year. Of course this is just a seasonal tendency and not too much of a concern unless GBP/USD starts to affirm it by taking out more important levels of resistance.
Much more important to me is how the pound reacts around the 61.8% retracement in time of the July 2014 – April 2015 decline early next week. As noted above, prior relationships from this trend cycle have had an important impact on price and how GBP/USD reacts around this key turn window should prove significant. My preferred scenario is for the pound to bottom out before the end of this week and actually rally into the turn window as another upside failure would help confirm the longer-term negative symmetry. Persistent weakness into early next week would raise concern that a low of some importance is setting up.
Suggested Reading: GBP/USD Pivots Near Wave Measurement Confluence
— Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com
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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