Analys från DailyFX
Surge in Silver Prices Pushes Momentum Readings into Rare Territory
What’s inside:
- Surge in silver pushes momentum readings into unusually high readings
- Momentum begets more momentum, further upside anticipated in days ahead
- Support and resistance levels outlined
What a rally in silver yesterday, amounting to more than the follow-through trade we were looking for in such short order. Our resistance zone in the 16.70/90 vicinity was exceeded, as the metal lifted by nearly 4% once the dust settled in New York.
Momentum, when looking at the short-term rate-of-change adjusted for current volatility, registered one of the stronger readings since the spike high in 2011, even stronger than the April rally.
Our 5-day volatility-adjusted momentum (VAM) model shot to just shy of 30 (29.82 to be precise), a threshold which has only been met twelve other times since the 2011 peak. Typically, such a powerful move in a short period of time led to further upside in the near-term, abliet often in a choppy-fashion as buyers exhausted themselves.
Follow-through may only last a few days, but typically momentum led to additional gains, barring the extreme reading came at the tail-end of a long advance (blow-off top) or decline (panic low); which in this case it is not. However, after those gains were notched the trend became exhausted and turned lower. So, this is to be treated as a short-term indication of strength, and beyond a few days we may be looking to take the otherside, price action willing.
Silver Daily w/VAM
With that in mind, we may see a minor retracement in the very short-term, but generally speaking the path of least resistance is higher looking out over the course of days. Then, we can look for a possible reversal.
On a pullback, we will be watching support in the 16.70/90 zone we had pegged previously as resistance (old resistance becomes support). It could dip below on an intra-day basis, but should hold on a daily closing basis. Being mindful of potentally choppier trading conditions, momentum shouldn’t be chased. Buying dips is clearly the favored approach on this end.
The next area of resistance to watch is around the 17.30 level, where silver a few weeks before had actively traded around. Beyond there we will look to 17.55/60 and 18.
It would require a sharp reversal lower to snap the current momentum and thus generally bullish view when looking out over the coming days.
Silver 2-hr
More broadly speaking, in prior commentary we made noted our disbelief that a strong rally could sustain itself due to market positioning, and maybe soon it won’t as we stated earlier, but until price action warrants a bearish bias we will run with what is right in front of us.
Want to learn how to better take your ideas from concept to the point of execution? Check out free trading guide, “Traits of Successful Traders”.
—Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX, and/or email him directly at probinson@fxcm.com.
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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