Analys från DailyFX
Price & Time: Risk Markets Testing Key Levels Going Into the Holidays
Talking Points
- Euro lacking conviction ahead of next week important cycle turn window
- AUD/USD rebounds off key Gann level
- SP 500 at key long-term resistance zone
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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 has come under modest pressure since last week’s failure at 1.3800
- Our near-term trend bias remains positive on the Euro while over the 2nd square root relationship of the year’s high at 1.3595
- The 61.8% retracement of the 2011/2012 decline at 1.3830 remains critical resistance with traction above required to inspire the next meaningful push higher in the rate
- A cycle turn window of importance is seen next week
- Only a daily close below 1.3595 would turn us negative on the Euro
EUR/USD Strategy: Favor the long side while over 1.3595
Price Time Analysis: AUD/USD
Charts Created using Marketscope – Prepared by Kristian Kerr
- AUD/USD closed at its lowest level since August of 2010 last week before rebounding from the 9th square root relationship of the October high at .8860
- Our near-term trend bias is lower in the Aussie while under .9005
- The .8860 level is now a key near-term pivot with weakness below needed to confirm a resumption of the broader decline
- A medium-term cycle turn window is in effect over the next few days
- A daily close over the 2nd square root relationship of the year’s low at .9005 would turn us positive on the rate
AUD/USD Strategy: Favor the short side while under .9005.
Focus Chart of the Day: SP 500
As we have mentioned in various notes the next 50 points or so in the SP 500 is a critical long-term resistance area. Using the FXCM fair value instrument, the 127% extension of the 2007/2009 decline is at 1823 while the 161.8% extension of the 2011 range comes in around 1864. Gann points related to the 2009 low are at 1834 and 1876. All of these levels in their own right look important enough to prompt some sort of counter-trend attempt, but given their relative close proximity (on a longer-term basis) it looks like a key zone from which to expect some sort of material corrective action. This seems to be even more the case when one factors in the historical extreme positive sentiment being exhibited of late towards the asset class as well as the increased use of leverage being used to speculate in equities (NYSE margin debt now around 2.5% of GDP). Of course a “material correction” is by no means guaranteed and we would prefer to see the market respond negatively to this resistance area before positioning too aggressively on the short side. A multi-day close over 1876 risks a parabolic push higher.
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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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