Analys från DailyFX
US DOLLAR Technical Analysis: The Dollar Bull Dilemma
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Talking Points:
- US Dollar Technical Strategy: ST Weakness Favored Toward 34-DMA, LT Bull View Intact
- Lack of FX Volatility Has Presented ‘Reversion to Mean’ Environment
- Seasonal Tendencies Favor USD Weakness for February
One can easily see that the trend on US Dollar is higher since October 15. However, one likely has a tougher time finding a good time to buy the US Dollar. This volatility within the uptrend has become the Dollar Dilemma of late whereas the uptrend continues as the US Dollar has strengthened over the last five weeks against the GBP, JPY, AUD while treading water for now against the EUR.
For now, the focus will remain on the red corrective price channel within the larger uptrend. Channels within channels can help you see the big picture while not losing sight of the daily or weekly theme in markets. The pivots help pave the way for the corrective channel and opens the view that we could soon be testing support once again before the next Dollar Bull Run takes hold. Aside from the JPY plummet on negative interest rates last week, the US Dollar has had a tough go since many markets (equities, energy, commodity FX) may have put in a bottom on January 20.
Key Levels: Watch the Recent Pivot to Hold
For now, the key support level on the US Dollar has turned to a confluence of support at 12,200. This level comprises of the 34-DMA, the recent price pivot before BoJ acted, as well as near bullish channel support. Short-term resistance will focus on the weekly pivot at the zone of 12,250-12,271. A break above that zone could open the floodgates toward the new highs, and the longer-term bull channel will resume.
A big development has also been the drop in US 2yr yields, which today retraced 61.8% of its 4Q rise. Given that the US Dollar has dropped more in such a drop in expectations for a rate hike and the potential for the European Central Bank to follow the BoJ in March, the Dollar dominance could continue throughout Q1 2016. However, if support fails to hold at 12,200, a deeper retracement could be afoot.
To see how FXCM traders are positioned, click here.
T.Y.
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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