Trade view /
15 September 2016 at 7:38 GMT
USD Index – We are not getting the bullish move that we originally expected and the outlook could be changing. There was a client of mine in my broker days who used to say ‘these aren’t door numbers sonny; they do move you know’. He was ‘old school’ from Chemical Bank (merged with Chase Manhattan).
The reason that I mention this is that we have to aware of what is changing (forming). The lack of the aggressive upside move could result in the whole August and September trading being a consolidating triangle pattern for the US dollar. If this is the case, the bias is to break lower.
Source: Saxo Bank
US retail sales today so could see some fireworks. With the Bank of England also on the calendar, I am looking to EURGBP. Please note from the start of this report that a break of support is needed to confirm the bearish view.
Monthly – The long-term bias remains bullish now that the cross has broken out of the channel formation to the upside. However, with a Doji candle posted in August close to the previous high of 0.8768, there is scope for a correction lower to possibly test the breakout level at 0.8075.
Weekly – Bullish five Elliott Wave pattern completed at 0.8723 (2016 peak). A bearish Evening Star formation was posted on the weekly chart and we did see a continued move to the downside. However, the selloff stalled inside our ‘band’ of bespoke support (0.8354-0.8316) and we have seen a move back to the upside. As far as Elliott Wave is concerned this should now be the complex correction lower (AB=CD).
Daily – The daily chart is a little more complex with a possible Head and Shoulders forming (bearish). There is ample scope for a move towards 0.8613 to form the right shoulder. We have posted a Doji style candle at the 50% pullback level of 0.8528 (from 0.8723-0.8332) so the BC leg could be completed. This is the reason why we say the next formation has to break.
Intraday (one hour) – We saw an impulsive move to the downside after bearish divergence was noted in this timeframe (chart makes a higher high while the oscillator (RSI) makes a lower high). Although we have seen a move to the upside overnight, 0.8527 is going to be a substantial barrier being the previous swing high and the 78.6% pullback level of the last move.
Traders could look to fade a move here with a stop above the high before the Bank of England today but it is a high risk trade. We have solid bespoke support at 0.8477 so would only look to sell the break.
It should also be noted now that daily close below 0.8415 will form a bearish daily Evening Doji Star.
Management and risk description
A move through 0.8365 and we look to move stop to entry.
Selling a break of 0.8465
medium term (end of September for target) - the trigger is for today only
— Edited by Clare MacCarthy
Non-independent investment research disclaimer applies. Read more