Analys från DailyFX
Short-term Selling Opportunity in GBP/USD to Start Last Week of May
The British Pound has been one of the worst performing currencies this year, losing -6.94% to the US Dollar through Friday’s close. (Only the Australian Dollar and the Japanese Yen are performing worse against the US Dollar, down by -7.15% and -14.37% through Friday, respectively.)
Over the past several weeks, the Sterling has been befallen by weak consumption data and signs of disinflation, provoking market participants into thinking that the Bank of England could revisit its QE program in August or September, after Mark Carney takes over the governorship from Mervyn King.
On the flip side, the US Dollar has been the benefactor of an increasingly hawkish tone from the Federal Reserve, best highlighted by Chairman Ben Bernanke’s testimony in front of a congressional committee last week, in which he indicated that if the US economy continues to improve, there is scope to slow the pace of QE3 incrementally.
Now, the US Dollar is taking on a hybrid role not only as a safe haven, but also as a growth currency, as US Treasury yields rise. With another batch of strong US data out due this week alongside neutral UK data, there is potential to see the GBPUSD slowly grind back towards its May lows, set last Wednesday, just above the psychologically significant $1.5000 level, at 1.5013.
A look at the 1 hour chart below suggests that a technical break in line with my view may already be beginning, denoted by the Bearish Rising Wedge. Accordingly, with a break and close below support this morning, there exists a favorable short GBPUSD setup that may evolve over the course of the next five to ten days.
GBPUSD 1-hour Chart: May 27, 2013
Charts Created using Marketscope – Prepared by Christopher Vecchio
STRATEGY – SHORT GBPUSD
Entry: At market (1.5110 at the time of writing)
Stop:1.5165 (above weekly high; above “Bernanke testimony” swing high) (-55-pips)
Target 1 (Reward/Risk Ratio): 1.5015 (76.4% Fibonacci retracement, March low to May high) (+95-pips, 1.73)
Target 2: 1.4835 (above yearly low) (+275-pips, 5.00)
Timeframe: 1– to 2-weeks
GBP EVENT RISK – May 26 to May 31
USD EVENT RISK – May 26 to May 31
— Written by Christopher Vecchio, Currency Analyst
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
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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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