Analys från DailyFX
Price & Time: Key Retracement In Time Ahead For the Euro
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Talking Points
- 61.8% time retracement this week in EUR/USD
- Historically positive seasonal period nears
Unfamiliar with Fibonacci Relationships? Learn more about them HERE
EUR/USD: Key Retracement in Time Coming Up
Wednesday of this week marks the autumnal equinox. For Gann analysts this is a potentially important time. The scientific world will usually scoff at such a notion, but Gann understood the divisional nature of time and its impact on market prices. His basic premise was that the natural world’s rhythm often coincides or more importantly impacts those of the financial markets.
EUR/USD has an interesting recent history with equinoxes. The low this year in the single currency, for instance, came the same week of the spring equinox. A seasonal chart of the euro (and deutsche mark) also shows a very clear tendency for strength after the autumnal equinox. Coincidence perhaps, but something worth following. As with all cyclical relationships I am big believer in the idea of convergence. In other words, the more unrelated potential timing relationships we have around a period, the higher the probability a turn of importance will occur.
This week’s equinox coincides with the 61.8% retracement in time of last year’s May high and this year’s March low on both a trading day and calendar day count. The trading day count is now, while the calendar day count is late this week/early next week. The calendar day count is arguably more important as previous time retracements related to the May 2014 – March 2015 decline have already led to turns in spot – most notably the 50% retracement which occurred last month right before the euro rallied some 7 big figures.
What does this all mean going forward? It is difficult to say as EUR/USD has been fairly choppy this past week. Perhaps Friday marked an important turn related to today’s 61.8% trading day retracement, but it is not my favorite scenario. Given the turn on August 24th occurred on a nice Fibonacci timing relationship, I have been giving the benefit of the doubt to the broader downtrend reasserting itself here shortly. As such a secondary high into the calendar day retracement later this week/early next week would be the more idealized scenario. We shall see. The wild card is the positive seasonal period coming up in the euro, but it is not too much of a concern unless EUR/USD continues to weaken past Wednesday.
— 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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