Analys från DailyFX
USD/CAD Shows Signs of an Ascending Triangle, But Wait for Confirmation
Talking Points:
- USD/CAD shows signs of an ascending triangle
- The pair has found resistance three times by 1.0709
- A rising trend line from October provides support
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Over the past month of trading, USD/CAD has found resistance three times by a high initially set at the beginning of December, but the pair still continues to set higher lows. Technically inclined traders will immediately recognize the recent pattern as an ascending triangle.
USD/CAD Daily
An ascending triangle is a pattern with an upper horizontal line that provides resistance and a rising trend line that provides support. An ascending triangle is usually considered a bullish continuation pattern and should follow a significant uptrend.
If we pull out a bit on the daily USD/CAD chart, we also see two other significant lines that should be considered when trying to trade the ascending triangle. The pair has found support by a longer-term rising trend line from October 22; this should confirm the desired longer-term uptrend mentioned in the previous paragraph. Also, an August high at 1.0568 has provided support since it was broken in late November.
USD/CAD Daily
The bullish continuation pattern on an ascending triangle is only confirmed once the pair has closed above the horizontal resistance line, meaning traders should wait for USD/CAD to close a daily candle above 1.0708 before considering buying the pair, or a conservative approach would be to wait for a close above the 3-year high at 1.0737.
Once a confirmed breakout is seen above an ascending triangle, technical traders would look for an extension beyond the horizontal line equal to the height of the triangle. In this case, the height between the start of the triangle and the horizontal resistance line is roughly equal to 180 pips. However, the 2010 high may also provide resistance at 108.54, which is only approximately 150 pips above the horizontal resistance line.
Alternatively, if USD/CAD declines further and closes below the December 23 low at 1.0623, the ascending triangle formation should be disregarded, as the pattern only remains relevant if the pair continues to set higher lows. Also, a close below 1.0623 means the rate has also fallen below both the rising trend line from October as well as the ascending trend line of the triangle. Finally, a close below support by the August high at 1.0568 may even lead some traders to look for a continued move lower.
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Chart created by Benjamin Spier using Marketscope 2.0
— Written by Benjamin Spier, DailyFX Research. Feedback can be sent to bbspier@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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