Analys från DailyFX
Price & Time:Euro Volume & Sentiment Becoming Worrisome
Talking Points
- EUR/USD turnover failing to confirm recent drop
- Gold nearing key support zone
- USD/JPY touches important long-term trendline
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Foreign Exchange Price Time at a Glance:
Price Time Analysis: USD/JPY
Charts Created using Marketscope – Prepared by Kristian Kerr
- USD/JPY reached new multi-year extremes late last week before stalling near a key long-term trendline connecting the 2002 2007 peaks around 109.50
- Our near-term trend bias remains higher in USD/JPY while above 107.40
- A close over 109.50 is needed to set up a new leg higher in the rate
- An important turn window is eyed next week
- A close under 107.40 would turn us negative on the rate
USD/JPY Strategy: Like holding reduced long positions above 107.40.
Price Time Analysis: GOLD
Charts Created using Marketscope – Prepared by Kristian Kerr
- XAU/USD has come under steady pressure to trade at its lowest level since the start of the year
- Our near-term trend bias remains lower while below 1240
- Key downside pivots look to be 1203 and 1193
- A cycle turn window of some importance is eyed over the next day or so
- A close over 1240 would turn us positive on the metal
XAU/USD Strategy: Square.
Focus Chart of the Day: EUR/USD
I think the latter part of this week/first half of next week has the potential to be quite significant for EUR/USD from a timing perspective. My reasons for this thinking are highlighted HERE. In addition to these timing elements I am also starting to see telltale warning signs of a reversal vis-à-vis volume and sentiment metrics. On the volume side the picture has begun to clearly shift over the past few sessions as turnover has dropped to below average levels as spot made new lows for the year. This is in sharp contrast to the action observed in July and August when EUR/USD broke to new trend lows on consistent levels of above average volume. This weak volume breakdown suggests the trend is nearing a potential exhaustion point. This interpretation is further supported by On-Balance-Volume (OBV) figures which have been diverging with the move lower in spot since about the start of the month. Perhaps the most significant development over the past few days is in sentiment which has seen pessimism towards the euro fall to its lowest level in years as the Daily Sentiment Index (DSI) touched just 3% EUR bulls this past Friday. Such extreme one way conviction in the direction of the market has been a reliable contrarian indicator in the past ahead of important inflection points in the exchange rate. It looking like it will be again.
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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.
— Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com
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
- Very relaxed at USD 75/b. Risk barometer will likely fluctuate to higher levels with Brent into the 80ies or higher coming 2-3 weeks
- Brent needs to fall to USD 58/b to make cheating unprofitable for Kazakhstan
- All eyes on OPEC V8 and their July quota decision on Saturday
- Brent steady at $65 ahead of OPEC+ and Iran outcomes
- A shift to surplus will likely drive Brent towards the 60-line and the high 50ies
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