Analys från DailyFX
USD/CHF Technical Analysis: Swissy Smashed as USD Crumbles
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Talking Points:
- USD/CHF Technical Strategy: Bullish price action reversed aggressively after last week’s Fed, U.S. GDP
- As USD-weakness has permeated markets, Swissy has put in an outsized fall; but did tag our second target at .9948 before reversing.
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In our last article, we looked at the bullish channel that USD/CHF was continuing to trade within. And while this was a relatively-young channel at only approximately three weeks as of our last article, the drivers behind the move were rather clear: U.S. rate hike expectations were driving a stronger Dollar, and given that the Swiss National Bank had already come out with spot market intervention around the Brexit referendum to quell a strong Franc, a relatively clean trend-channel began to show in USD/CHF.
But last week was not kind to U.S. rate hike expectations. On Wednesday, we heard from the Federal Reserve, and while the bank did add a slightly hawkish tweak to their statement, producing a quick rush of USD strength to tag the longer-term Fibonacci level at .9948 before turning lower. But the net takeaway was USD-weakness as investors ramped up the expectation for the Fed to continue doing what they’ve been doing (passively supporting risk markets). And then on Friday, an abysmal GDP report provided another douse of cold water on near-term rate expectations; as the prospect of the Federal Reserve hiking and ‘normalizing’ rate policy in the face of negative data shot those rate expectations even lower, pulling the U.S. Dollar along in tandem.
As of this writing, near-term price action is finding resistance around old support in the .9700-neighborhood, which is the 50% Fibonacci retracement of the May-November, 2015 major move; while also being the June ‘swing-low’ in the pair. And while this is bearish, traders would likely want to question the potential of how deep this may run, as a longer-term batch of support around the .9500-area may stem near-term declines. More interesting would be support showing above the prior swing-low of .9520, as this could offer a longer-term bullish setup in anticipation of playing the expected continued divergence between US and Swiss rate expectations. For now, that divergence is going the other direction as U.S. rate hike expectations are getting priced further-and-further into the future
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
You can receive Paul’s analysis directly via email bysigning up here.
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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