Analys från DailyFX
Price & Time: Is the ’Feel Good’ QE Era Really Coming to an End?
Talking Points
- EUR/USD rebounds off key Gann level
- GOLD consolidates below key resistance
- USD/JPY a key cyclical inflection point
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 traded to its lowest level since late November earlier this week before rebounding off the 1×1 Gann angle line of the 2013 low near 1.3500
- Our near-term trend bias is lower in the exchange rate while below the 2nd square root relationship of this week’s low near 1.3710
- A close below 1.3500 is needed to signal a resumption of the broader decline
- A minor cycle turn window is seen today
- Only a close over 1.3710 would turn us negative on the Euro
EUR/USD Strategy: We like the short side while below 1.3710.
Price Time Analysis: GOLD
Charts Created using Marketscope – Prepared by Kristian Kerr
- XAU/USD remains in consolidation mode since encountering strong resistance last week at the 38% retracement of August to December decline near 1276
- Our near-term trend bias is higher in Gold while above the 50% retracement of December to January range at 1229
- A daily close over the 61.8% retracment of the August to December decline at 1292 is really needed to signal the start of a more important move higher in the metal
- A cycle turn window is seen around the second half of the month
- Only a daily close below 1229 would focus immediate attention lower
XAU/USD Strategy: Like only small longs while over 1229.
Focus Chart of the Day: USD/JPY
We noted in yesterday’s piece the importance of the end of the week for the SP 500 from a time cycle perspective. Whether the pro-risk “QE trade” has one more leg in it or not likely depends on what materializes in the aftermath of today’s US employment data. Given the high correlation of USD/JPY to equities over the past year we obviously expect the exchange rate to be similarly influenced. We should note, however, that USD/JPY also has an important longer-term cycle turn window of its own this week which increases our conviction that we are at an important inflection point in terms of time for global markets as a whole. As for USD/JPY, the reversal from the 100.80 200% extension of the mid-January advance earlier in the week looks like a potential low of importance. Continued strength next week would further confirm this notion. With NFPs on the horizon we can’t rule out a spike lower (though it seems unlikely), but only weakness AFTER TODAY below 100.80 (or whatever is this week’s low) would signal that a much deeper decline is likely over the next few months.
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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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