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Technical Analysis: Resurgent ASX Dares to Dream Of 6000

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Talking Points:

  • The ASX 200 has bounced back with aplomb
  • Momentum may now take it back up to the 6,000 level
  • But the atmosphere gets thin up there, and not only technically speaking

Australia’s benchmark stock index staged a remarkable turnaround this week.

Just a few sessions ago it was skulking below trendline support, having tried and failed to crack the year’s peaks for a third time. But look at it now.

Right back up there: ASX 200

Technical Analysis: Resurgent ASX Dares to Dream Of 6000

From the one-month low of 5681 hit on March 22 the index has surged more than 3%. With all the verdant green on the chart, the ASX even managed a daily close above its previous intra-day range high for the year of 5832. That peak had endured since mid-February but the index charged well above it on Tuesday and remains there.

Indeed, it’s now at its highest levels since April 2015.

Should the ASX manage to consolidate this admittedly very sharp rise, then investors will no doubt dare to dream about the psychologically important 6,000 point. But hitting that’s a tricky ask. The Aussie index last got tantalizingly close back in February 2015 before the bulls eventually gave up after four valiant attempts.

Before that we must go all the way back to the dying days of pre-crisis innocence – in 2007 and 2008 – to see the ASX at 6000. And it was hardly comfortable there even then.

To stray from technical analysis just for a moment, the index also looks a bit pricey. It’s reportedly trading on 16.1 times forward earnings. And that’s about 6% above the five-year average. Admittedly investors have paid more in the recent past, but not often. Valuations have also been revised upward quite substantially, especially in the raw-material sector, but that good news is of course in the price and won’t necessarily be repeated.

More ominously a move to 6,000 would see investors paying above 17 times earnings, and that’s not a level they’ve ever been happy with for long. So, while sustained momentum could get the index back to “starting with a six,” it may not linger at those rarified heights without some better fundamental news.

Would you like to know more about financial market trading? The DailyFX Trading Guide is all yours.

— Written by David Cottle, DailyFX Research

Contact and follow David on Twitter: @DavidCottleFX

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EURUSD Weekly Technical Analysis: New Month, More Weakness

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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

EURUSD Weekly Technical Analysis: New Month, More Weakness

—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.

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Euro Bias Mixed Heading into October, Q4’17

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Euro Bias Mixed Heading into October, Q4'17

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

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British Pound Reversal Potential Persists Heading into New Quarter

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British Pound Reversal Potential Persists Heading into New Quarter

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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