Analys från DailyFX
Price & Time: What Happens When Everybody Thinks the Same Thing?
Talking Points
- Frothy equity market sentiment making us nervous
- Euro fails at key Gann resistance level
- Cable closing in on important resistance
Looking for a way to pinpoint sentiment extremes in real time? Try the Speculative Sentiment Index.
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 highest level in over two-weeks on Tuesday before reversing near the 1.3540 7th square root progression of the year’s low
- Our near-term trend bias is lower in the Euro while below 1.3595
- The 1.3430 area is immediate support, but weakness under the 4th square root relationship of the year’s high at 1.3360 is needed to signal a broader downside resumption
- Today is the tail end of an important cycle turn window
- A daily close over 1.3595 would shift our near-term trend bias back to positive in the Euro
EUR/USD Strategy: Like the short side while below 1.3595.
Price Time Analysis: AUD/USD
Charts Created using Marketscope – Prepared by Kristian Kerr
- AUD/USD has moved steadily higher from last week’s cycle turn window
- Our near-term trend bias is now higher following the daily close over the 4th square root relationship of the October high at .9360
- A Gann angle convergence near .9475 is a clear upside pivot with traction above needed to signal the start of a more important move higher
- Today is a minor turn window in the exchange rate
- A daily close back under .9360 would turn us negative on the Aussie
AUD/USD Strategy: Like buying on weakness over the next day or two against .9360.
Price Time Analysis: GBP/USD
Charts Created using Marketscope – Prepared by Kristian Kerr
- GBP/USD touched its highest level in over two-weeks on Monday
- Our near-term trend bias is now higher following the break of the 50% retracement of the late October/early November decline at 1.6055
- A convergence of Gann levels near 1.6215 needs to be overcome to signal the start of a more important advance
- Today is a minor cycle turn window
- A 3rd square root relationship of the year’s high at 1.5950 is important support and only a close below this level would turn us negative on Cable
GBP/USD Strategy: Looking to buy on weakness.
Focus Chart of the Day: SP 500
The frothy sentiment in the US equity market is beginning to make us a little nervous. On Friday the Daily Sentiment Index (a daily survey of short-term futures traders) in the SP 500 touched 93% bulls. This is higher than what was seen at the peak in October 2007(before the Financial Crisis) and the peak in April 2010 (before the Flash Crash). Now we are not saying that a flash crash event is imminent, but when sentiment becomes so lopsided an extra bit of caution is always needed. We say this because to get to 93% bulls the equity market has to pretty much price out all outside risk. Historically, such thinking is a powder keg as any challenge to the view can spark a very messy and aggressive unwind with the whole market so clearly leaning all in the same direction. In the SPX, both 1813 and 1833 look important from a Gann perspective. Under 1742 at anytime would warn that top of some significance is in place.
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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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