Analys från DailyFX
USD/CHF Technical Analysis: Swissy Pops, but Still in Range
Talking Points:
- USD/CHF has been mired in range-like conditions for the better part of the past seven months.
- More recently, USD/CHF had built within an even smaller range, which is currently offering resistance after a quick move higher over the past couple of days.
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In our last article, we looked at the range within a longer-term range that had developed in USD/CHF. And as we wrote, the shorter-term, smaller range could present complications until a more well-tested level of support or resistance came into play, because the shorter term range had a minimum span of only 140 pips, thereby reducing the potential upside of the setup.
Over the past two days the US Dollar has seen an aggressive bid as hawkish Fed comments have prodded the market higher. This rallied USD/CHF right up to the bottom of the short-term resistance zone that we looked at last week. This could potentially open the door for short positions, but traders would likely want to investigate the risk-reward behind the setup to ensure that they’re comfortable: And perhaps more to the point, the trader would want to be comfortable fading a move that could have significant continuation potential, as the Federal Reserve has displayed a persistent pattern of hawkishness throughout 2016 that may continue to drive the dollar higher until we see some form of FOMC dovishness enter the equation.
For traders looking to play the short-term range by selling near-term resistance, there’s approximately 110 pips down to the top of the short-term support zone at .9682. This would mean a stop of less than 55 pips can offer a 1-to-2 risk-reward ratio, which would mean that traders would be able to wedge stops at or below the .9850 level in the pair. And while this wouldn’t get above the swing-high from August 31st, it could give traders a chance to get a stop above the price action swings from earlier in August.
Perhaps more interesting is the longer-term range; and if this strong Dollar theme on the back of hawkish Fedspeak can continue, this level may come into play in the not-too-distant future. The level at .9949 is extremely interesting, as this is the 61.8% retracement of the 2010 high to the 2011 low in the pair; and more-to-the-point, this set swing-high resistance in both May and July.
Chart prepared by James Stanley
— Written by James Stanley, Analyst for DailyFX
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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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