Analys från DailyFX
Price & Time: In Search of a Big USD Low
Talking Points
- Convergence of cyclical relationships point to USD strength ahead
- EUR/USD closing in on major downside pivot
- Big Gann resistance looms in AUD/USD
Unfamiliar with Gann Square Root Relationships? Learn more about them HERE.
Foreign Exchange Price Time at a Glance:
Price Time Analysis: EUR/USD
Charts Created using Marketscope – Prepared by Kristian Kerr
- EUR/USD remains under pressure following the mid-month failure from just above the 50% retracement of the 2008/2010 decline
- Our near-term trend bias is lower in the Euro while below 1.3875
- The 2nd square root realtionship of the year’s high near 1.3730 is an important near-term pivot as weakness below is required to confirm that a broader move lower is unfolding
- A minor cycle turn window is seen around the middle of next week
- A move back over 1.3875 would re-focus higher
EUR/USD Strategy: We like the short side while below 1.3875.
Price Time Analysis: AUD/USD
Charts Created using Marketscope – Prepared by Kristian Kerr
- AUD/USD broke above the 50% retracement of the October/January decline near .9210 to trade at its highest level since November
- Our near-term trend remains higher in the Aussie while above .9160
- The 6th square root relationship of the year’s low at .9260 is important resistance and a possible point of failure over the next couple of days
- A cycle turn window is seen over the next few days
- A daily close below under .9160 would turn us negative on the exchange rate
AUD/USD Strategy: We like the long side while over .9160, but positions should probably be reduced approaching .9260.
Focus Chart of the Day: FXCM Dollar Index
On Monday we wrote a focus on the Dow Jones FXCM Dollar Index. The gist of the piece was that we thought a secondary low was setting up in the Greenback if it traded lower into the end of the week. The weakness we were looking for materialized as the Index has closed lower for 4 straight days now. If our cyclical analysis is correct then USD should turn up in the next few days and begin a general move higher. Our conviction is bolstered by the recent action in Gold as a similar cyclical relationship to the one that has seen the metal come under pressure recently should start to influence in the Index in the days ahead. We can’t rule out a final move lower, but only weakness after Monday under 10,500 would completely undermine the positive cyclical view. On the topside, a median line related to the 2013 high around 10,560 looks to be key resistance with a daily close over this level required to confirm that a bottom of some kind is indeed in place.
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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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