Trade view /
15 July 2016 at 8:45 GMT
With the USD Index, we really are in ‘no man’s land’ at the moment. For the last 14 days, we have held within a relatively tight range of 98.68-95.37, and, as a result, most dollar-based pairs are in mixed and volatile corrective patterns. We still think that the bias is bullish, with this highlighting a potential flag in the USD Index.
USD Index is in a tight range
Source: Saxo Bank
We are looking at EURGBP today as we believe that the next corrective leg higher is underway. Numerous factors, including correlation, give an upward bias.
Monthly – Broken out of the channel formation to the upside. Gains are being rejected above the 0.8500 area and there is scope for a corrective move back towards 0.8125 (breakout level) in a choppy manner. Only a monthly close inside the channel would make us rethink this bullish bias.
Weekly – Rotating around the trend of lower highs (from Q1 and Q3 2013) after extending the fifth wave (Elliott wave) at the 261.8% extension level of 0.8400 (from 06929-0.7491). We are now assessed as being the corrective AB=CD leg.
Four hour – We have broken out of the Ending-Wedge formation to the downside. The last move lower can be seen in five waves. This is a common occurrence in the first corrective wave lower, the AB leg of an AB=CD formation. Bullish Outside Bars on four-, two- and one-hour charts offer an upward bias. Likely resistance is at 0.8370-0.8400.
GBPUSD looks to have completed a bullish five-wave pattern higher (Elliott Wave). We are now short GBPUSD, looking for a drive lower in a corrective formation to possibly form a bullish reverse Head and Shoulders pattern close to 1.3140-1.3058 (buyers return). This offers a downward bias in GBP.
EURUSD – Really messy trading while the USD consolidates. We don’t see any strong resistance now until 1.2230, so there is plenty of scope for a corrective move to the upside within the bullish channel.
Management and risk description
The first leg on the BC phase is seen at 0.8370. We will then look to buy again on a pullback. This should be a three-wave pattern toward 0.8400.
long at 0.8309.
— Edited by D. Deacon
Non-independent investment research disclaimer applies. Read more