Analys från DailyFX
USD/CHF Technical Analysis: Be Careful of Pushing Short-USD
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Talking Points:
- USD/CHF Technical Strategy: Continued drift higher after last Friday’s Post-Brexit breakout.
- USD/CHF may be a difficult candidate if looking to push short-USD themes, as the prospect of Swiss National Bank intervention may stem the declines.
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In our last article, we looked at the range that had built-in to USD/CHF just ahead of the Brexit referendum. And as we warned, this range was extremely vulnerable as the upcoming vote around the U.K. leaving the European Union had the potential to roil macro-economic themes across global financial markets.
And roil it did: Voters surprised markets by electing to ‘leave’ after a risk-on rally had built-up on the presumption that voters would choose to continue the status quo by voting to stay. As news permeated markets that many districts were showing stronger-than-expected results on the leave side of the campaign, risk aversion began to show across global markets. This brought a major bid to haven assets such as Gold, Treasuries, the Japanese Yen and the US Dollar. Also high on that list of ‘haven assets’ is the Swiss Franc, as we saw the Euro drop by nearly 400 pips over a seven-hour window as the results were making their way into markets.
And then something familiar happened: The Swiss Franc started dropping aggressively, spiking against the Euro by more than 250 pips over the next four hours. It wasn’t until later that we heard that this was the product of the Swiss National Bank intervening in currency markets to stem the rampant Franc strength that was being seen in this ‘flight-to-quality.’ If anything, the surprising part was that the SNB actually admitted this, as they normally ‘no comment’ questions regarding intervention; and this itself should serve as warning for traders that the SNB is watching for excessive Franc strength.
So, this is a pair that traders should be extra cautious with if looking to implement short-USD price action themes; as there may simply be greener pastures to voice that same theme without the threat of the representative Central Bank jumping on the other side of the trade.
However, for traders that do want to look at long-USD continuation strategies, Swissy may be or become an attractive candidate for such a theme. At current, price action appears to be attempting to carve out a ‘higher-low’ on the 61.8% Fibonacci retracement of the most recent major move. But be careful here, as a confluent zone of Fibonacci resistance just ~60 pips away could cap top-end movements in the near-term. More attractive would be a deeper retracement to the 50% Fibonacci level around .9738; or to take matters a bit further, we have another confluent zone in the .9686-.9700 area that could also be an attractive area of resistance. Should support build-in around either of these zones, top-side continuation strategies could become attractive, targeting that same .9850 zone of potential resistance.
Created with Marketscope/Trading Station II; prepared by James Stanley
— Written by James Stanley, Analyst for DailyFX.com
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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
—Written by Paul Robinson, Market Analyst
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You can follow Paul on Twitter at@PaulRobinonFX.
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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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