Analys från DailyFX
USD/CHF Technical Analysis: Breaking the Range with Reckless Abandon
USD/CHF Technical Analysis: Breaking the Range with Reckless Abandon
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Talking Points:
- USD/CHF Technical Strategy: Rampant USD-strength continues, 8-month range broken.
- Swissy is still below resistance values from earlier in the year, which could keep the door open for reversal strategies for traders looking to take on short-USD exposure.
- If you’re looking for trading ideas, check out our Trading Guides.
In our last article, we asked if the range in USD/CHF was still alive. But the rampant run in the U.S. Dollar is continuing to smash through resistance levels as the ‘reflation’ trade gets further priced-in to markets; and this has led to major support or resistance breaks in key areas such as EUR/USD, USD/JPY and Gold. But, for much of this run one of the apparent laggards in showing that USD-strength has been USD/CHF, as the pair had previously remained below prior resistance levels, giving rise to the idea that this could be an attractive venue to voice short-USD exposure.
But as we had written last week, with fresh highs showing, traders would likely want to put the range-trade on the back-burner until more information unveiled itself. And it has, but in terms of the prospect of range continuation that additional information hasn’t been very positive, as USD/CHF has broken out to fresh nine-month highs, taking out the March swing high at 1.0092 along with it.
Moving forward, traders would likely want to look elsewhere to voice long-USD themes, as USD/CHF has continued to lag behind markets such as EUR/USD, USD/JPY or Gold in pricing-in this newfound bout of USD-strength. This could also keep the pair as potentially attractive for traders looking to manage off long-USD exposure, or for those looking at reversal plays in the Greenback. There are three potential resistance levels that can be utilized for such an approach, as we look at below. Of particular note, the zone around 1.0300 is interesting as this is the 61.8% retracement of the 8-year move in the pair (taking the 2008 high to the 2011 low), as well as being the six-year high in USD/CHF.
Chart 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
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
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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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