Analys från DailyFX
Price & Time: Reversal in the Pound Significant?
Talking Points
- EUR/USD breaks below key support level
- Gold testing important resistance
- GBP/USD approaching important near-term pivot
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Foreign Exchange Price Time at a Glance:
Price Time Analysis: EUR/USD
Charts Created using Marketscope – Prepared by Kristian Kerr
- EUR/USD closed below the 1.3655 2nd square root relationship of the 2012 high on Friday
- Our near-term trend bias is now negative on the Euro and will remain so while below 1.3800
- The 3rd square root relationship of the 2012 high at 1.3540 is the next significant downside attraction for the exchange rate
- Minor cycle turn windows are seen around the middle of this week and early next week
- Only a daily close over last year’s closing high near 1.3800 would turn us positive on the Euro again
EUR/USD Strategy: Like selling the Euro into strength while below 1.3800.
Price Time Analysis: GOLD
Charts Created using Marketscope – Prepared by Kristian Kerr
- XAU/USD has moved steadily higher since finding support on the last day of trading last year at the 161.8% extension of the October advance near 1183
- Our near-term trend bias is lower while below 1243
- An interim downside pivot is seen at 1206, but traction under 1183 is really required to signal a resumption of the broader decline
- A minor cycle turn window is seen around the middle of the week
- A daily close over the 2nd square root relationship of the 2013 low at 1243 is required to turn us positive on the metal
XAU/USD Strategy: Like the short side while under 1243.
Focus Chart of the Day: GBP/USD
GBP/USD peaked last week during a medium-term cycle turn window on the first official day of trading for 2014. What makes the reversal potentially more important is the fact it came just a few pips shy of the 15th square root relationship of the 2013 low at 1.6610 (setting up a possible price/time “square out”). Interestingly the 1st quarter high in 2013 came on the on the first day of trading and this led to a sharp multi-month decline. It is much too early in this move down to suggest that something similar will occur, though we do see scope for at least a multi-week decline based on the current cyclical profile and the fact January is historically one of the worse performing months for Cable. The 2nd square root relationship of last week’s high at 1.6340 is a key near-term pivot with weakness below on a closing basis needed to further confirm the cyclical importance of recent price action.
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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
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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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