Analys från DailyFX
Price & Time: Next Week is Critical for Equities From a Timing Perspective
Talking Points
- EUR/USD fails at important long-term retracement, bigger decline ahead?
- Gold closing in on important resistance zone – top possible
- Major inflection point for equities next week
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 recorded a new multi-year high yestersday before encountering strong resistance at the 50% retracement of the 2008/2010 decline near 1.3970
- Our near-term trend bias remains positive in the Euro while above the 2nd square root relationship of year’s high at 1.3730
- The 1.3970 levels remains a critical resistance that must be overcome soon if the exchange rate is to embark on a more important move higher
- A medium-term turn window is seen later next week
- A close under 1.3730 would shift our near-term trend bias to negative
EUR/USD Strategy: Like the long side while over 1.3730.
Price Time Analysis: GOLD
Charts Created using Marketscope – Prepared by Kristian Kerr
- GOLD touched it highest level since September earlier today
- Our near-term trend bias is higher in the metal while above 1348
- The 78.6% retracement of the August/December decline at 1379 is the next big action/reaction level
- A broader cycle turn window is seen through the middle of next week
- A daily close under 1348 would turn us negative on the metal
GOLD Strategy: We like the long side while over 1348, but positions should probably be reduced here.
Focus Chart of the Day: SP 500
Recently we have highlighted the cyclical importance of next week for several markets, but our main focus is on the US equity market as so many things are aligning there. With the relentless grind higher and maniacal sentiment in the main indices over the past few months our bias has been for a top of some kind to come out of next week. However, the weakness being exhibited in equities over the past few days has come a little early and we now have to be open to the possibility of “cyclical inversion” (i.e. a low) if the pace of the decline in the indices picks up heading into next week’s turn period. A turn around today or over the weekend that sees the indices bounce back to near recent highs would ironically be bearish in our view as it likely would set up the important top we are looking for next week. Stay tuned.
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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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