Analys från DailyFX
USD/CHF Technical Analysis: Bullish Breakdown
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Talking Points:
- USD/CHF Technical Strategy: prior up-trend in question with break below 50% retrace of post-Election move.
- The bullish-trend in Swissy is now in question; but RSI divergence of the recent bearish-move urges caution for bearish continuation approaches.
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In our last article, we looked at the retracement of the prior up-trend in USD/CHF as price action was testing the 50% retracement of the post-Election move at .9943. And that level comes-in very near another relevant Fibonacci level, as the 61.8% retracement of the major move spanning the 2010 high to the 2011 low is at .9951; producing a very interesting ‘zone’ that had provided numerous instances of resistance in 2016 as the range in USD/CHF continued for much of the year.
As we had noted in that last piece, this confluent zone of support could be considered a line of demarcation for bullish approaches; with breaks below further nullifying the strength that was seen from the initial move, and thereby questioning continuation prospects. This week saw price action in Swissy slide-lower, finally running below this long-term confluent zone; and while buyers did show-up around the .9850 handle to offer quick iteration of short-term support, sellers have come right back as resistance was tested in that prior zone of support. This continues the near-term bearish price action on Swissy, and bulls would likely want to take note.
On the bearish side of the pair, there are flaws as well. The bearish move appears to be getting a bit long-in-the-tooth as RSI on the 4-hour chart is continuing to highlight divergence. And while that prior zone of support is now showing as resistance, the past 24 hours have seen a quick higher-high and higher-low develop around a really heavy economic calendar.
For bearish continuation approaches, traders would likely want either one of two scenarios: A deeper test of resistance around the parity handle, at which point a stop could be set above prior point of resistance around 1.0038; or a fresh-low to indicate that bears can continue driving the pair lower, at which point near-term levels of support could become ideal resistance entries.
On the bullish side of the pair, traders would likely want to see some element of resolution from this recent congestions, letting price action break back-above parity before entertaining top-side approaches.
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
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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
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