Analys från DailyFX
Technical Analysis: ASX 200 Loses Its Grip On Key Support
Talking Points:
- The ASX 200 has slipped below a support line which has been important since late February
- This doesn’t have to be bad news
- But a recovery needs to come soon
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My last technical peep at the ASX 200 was an attempt to draw your attention to the curious importance of February 28, 2017.
There was nothing immediately special about the low printed on that day, around 5675.30, beyond the fact that it put an end to a modest downtrend. But that level went on to become quite significant support for the index and remained so until this week. Indeed, it had repelled the bears on no fewer than three occasions since February and formed the meaningful low for the year.
But now it has given way.
Wednesday’s marked slip for the index took us down to the 5646 area, where we remain.
Alright, you may argue, perhaps the importance of that support was always overdone.
After all, its significance is really only down to a few days’ intraday lows since February 28 – on March 22, May 18 and May 30.
But a look at the chart below would suggest that this level means something and that its break could be important.
At a minimum, any fall below it sharpens the downtrend in place since May 2.
There is a caveat though, albeit one which means we must stray from technical analysis. It is possible that markets everywhere are a little more than usually risk averse at present. Various looming global events may make this so. Not least among them is Thursday’s UK general election, the prize of which will be the dubious privilege of negotiating Brexit. Then there’s former Federal Bureau of Investigation Director James Comey’s testimony to the US Senate.
If either or both proceed as markets hope – i.e. preserving the status quo ante – then we could see a snap back in risk appetite which should benefit the ASX at least as much as any other index.
In that case, watch carefully how much further it can get above those February 28 lows. If risk appetite remains restrained however, expect the downtrend’s dominance to endure.
— Written by David Cottle, DailyFX Research
Contact and follow David on Twitter:@DavidCottleFX
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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