Analys från DailyFX
US Dollar News Reversals Present Trading Opportunities
- USDJPY news reversal is consistent with larger bull
- USDCAD reverses from a major support area
- EM FX (ZAR and MXN) conditions are consistent with larger trend resumption
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Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
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-On Wednesday, USDJPY held a trendline confluence from the lines that extend off of the August lows and former resistance line off of the May and July highs. The quick reversal bodes well for bulls.
-Thursday’s USDJPY decline was accompanied by strong volume (95th percentile measured over 20 days for CME volume).
-21, 63, and 126 (1, 3 and 6 month) averages are bunched together. This condition indicates a ‘coiled’ market seen often prior to trend moves.
-The break from the multi-month triangle remains valid. A complex inverse head and shoulders may be underway, which also portends a significant advance (if confirmed on a breakout).
-The Nikkei is trending higher. See last week’s report for more on that market.
Trading Strategy: Expecting 98.85-99.00 to serve as support if reached. Buying dips into there with a stop under the Wednesday low. If not triggered, then will probably need to employ breakout tactics.
Daily
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
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-USDCAD made a key reversal on a larger than average range Thursday. Friday’s follow through confirms the tradeable low.
-More important, the reversal occurs at a huge support level defined by the line that extends off of the September 2012 and January 2013 lows as well as the 100% extension of the decline from the July high (2 equal legs) AND corrective channel support.
-The reversal occurred on heavy volume (20 day high in CME volume).
-Price has retraced the entire Fed move (USDCAD was at 1.0290 at 2 pm on Wednesday) to trigger a possible news reversal trade. USDJPY trade from Thursday exemplifies a successful news reversal trade.
Trading Strategy: Watch for an early week low to get long against Wednesday’s low. 1.0230/60 is support. Target half at 1.0400.
Daily
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
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-USDMXN made a key reversal on a larger than average range. Friday’s follow through confirms a tradeable low.
-The reversal occurs at the 126 day average (6 month average). This average has pinpointed important support and resistance in the exchange rate for over a year.
-The reversal occurred on heavy volume; the third largest one day volume (CME) of the year in fact and most volume since 6/20/13 (high of the year).
-21 day RSI dropped into 40 and rebounded. The May and July lows were registered when RSI(21) was at or slightly below 40.
Trading Strategy: Order to go long at 12.72, stop 12.58 and target half at 13.04.
Daily
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
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-USDZAR made a key reversal on a larger than average range Thursday. Friday’s follow through confirms the tradeable low.
-The reversal occurs near the 126 day average (6 month) and after a drop below the July low (false breakdown?). This is the biggest penetration of the 126 day average since April 2012 but price only closed below the average for 1 day.
-21 day RSI dipped below 40 and crossed back above after 1 day. This action is also consistent with a bottom.
Trading Strategy: Price has rallied nearly 3% in 2 days and is nearing last Friday’s close (uncovered close after the Sunday gap). A reaction (lower) from that level (9.91) will probably present a chance to buy a dip. Keep 9.75-9.78 in mind for support.
— Written by Jamie Saettele, CMT, Senior Technical Strategist for DailyFX.com
To contact Jamie e-mail jsaettele@dailyfx.com. Follow him on Twitter @JamieSaettele
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
Confidence is essential to successful trading, see this new guide – ’Building Confidence in Trading’.
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
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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
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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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