Analys från DailyFX
Price & Time: What to Watch in the Wake of the FOMC
Talking Points
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Focus Chart of the Day: USD/CAD
The move higher in USD/CAD over the past week or so has been impressive as the exchange rate has overcome several key technical levels with relative ease. During this push higher, sentiment towards the Canadian Dollar has collapsed. The Daily Sentiment Index (DSI) for instance, is now at around just 10% bulls. Such lopsided sentiment is usually reserved for rates near yearly extremes. USD/CAD is still well below its year-to-date high and the extreme in sentiment being exhibited is no doubt unusual. However, it is still a warning sign that needs to be respected especially as Funds closes in on a medium-term cycle turn window in the next few days. Ideally sentiment will drop a bit further to setup the ‘perfect reversal’. More on this as it develops.
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 further downside pressure following last week’s failure at the 61.8% retracement of the 2011 to 2012 decline
- Our near-term trend bias is still positive on the exchange rate and only a move below 1.3655 would shift it to negative
- Resistance between 1.3830 and 1.3890 is an important attraction/reaction zone and traction over it is needed to prompt a continuation of the broader advance
- A minor cycle turn window is seen around the end of the week and general weakness is favored into this timeframe
- A daily close below the 9th square root progression of the year’s low at 1.3655 would turn us immediately negative on the Euro
EUR/USD Strategy: Like holding only a reduced long position while above 1.3655.
Price Time Analysis: NZD/USD
Charts Created using Marketscope – Prepared by Kristian Kerr
- NZD/USD has come under steady downside pressure following the failure a couple of week’s back at the 78.6% retracement of the year-to-date range
- Our near-term trend bias is lower in the Kiwi while below the 50% retracement of the October range near .8370
- The 38% retracement of the June to October advance in the .8215 area is important support with weakness below needed to prolong the current decline
- A minor cycle turn window is seen later this week
- Only aggressive strength back through .8370 would turn us positive on the Bird
NZD/USD Strategy: Like the short side while below .8370.
Price Time Analysis: GOLD
Charts Created using Marketscope – Prepared by Kristian Kerr
- XAU/USD has moved steadily higher from the cycle turn window around the middle of the month
- Our near-term trend bias is higher in Gold while above the 1×1 Gann angle line of the year’s closing low in the 1270 area
- The 61.8% retracement of the August to September decline at 1363 is immediate resistance ahead of a Gann attraction at 1372
- A cycle turn window is seen later next week
- Only unexpected aggressive weakness below 1270 on a closing basis would turn us negative on the yellow metal
XAU/USD Strategy: Like the long side while over 1270.
— 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
Looking for a way to pinpoint sentiment extremes in real time? Try the Speculative Sentiment Index.
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
Confidence is essential to successful trading, see this new guide – ’Building Confidence in Trading’.
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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