Analyst Articles – Forex News 24

EURGBP Extends Winning Streak as Brexit Uncertainty Weighs
Further Bearish Momentum Hints at 139.00
Negative Bias as Italy-German Yield Spread Widens

EURGBP Extends Winning Streak as Brexit Uncertainty Weighs

Posted: 16 May 2019 08:46 AM PDT

EURGBP Price Outlook:

EURGBP Extends Winning Streak as Brexit Uncertainty Weighs

On the back of renewed Brexit uncertainty, EURGBP has staged an incredible rally over the last 9 trading days, surging from 0.8492 to 0.8748. The streak is the longest for EURGBP since the end of 2008 when the pair matched the current run. Beyond that, there has only been one bullish streak longer than 9 sessions since 1999, a 10-day rally in September 2007.

EURGBP Consecutive Candle Count, Daily (Chart 1)

In Thursday's session, the pair has backed off 0.8750 after probing the 23.6% Fib retracement from July 2015 lows to August 2017 highs. Coupled with technical resistance, Theresa May has reportedly said she will set her timeline to stepdown from her position in June. With a concrete date, Sterling may see a brief reprieve as it slides against most counterparts. That said, retail clients remain overwhelmingly short EURGBP – despite the considerable rally to 3-month highs.

EURGBP Price Chart: Daily Time Frame (June 2017 – May 2019) (Chart 2)

Retail trader data shows 30.4% of traders are net-long with the ratio of traders short to long at 2.29 to 1. The number of traders net-long is 15.1% lower than yesterday and 38.6% lower from last week, while the number of traders net-short is 3.0% higher than yesterday and 45.2% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EURGBP prices may continue to rise. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger EURGBP-bullish contrarian trading bias.

EURGBP IG Client Positioning (Chart 3)

IG clients have been net-short the pair during the latter half of the streak as they attempt to call the top. To learn more about sentiment data and how to use it in your trading, sign up for my sentiment walkthrough webinar later today. Aside from the bullish contrarian signal, persistent uncertainty around Brexit will continue to erode confidence in the Pound as the Euro looks to add to its streak.

–Written by Peter Hanks, Junior Analyst for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX

DailyFX forecasts on a variety of currencies such as the US Dollar or the Euro are available from the DailyFX Trading Guides page. If you're looking to improve your trading approach, check out Traits of Successful Traders. And if you're looking for an introductory primer to the Forex market, check out our New to FX Guide.

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2019-05-16 15:30:00

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Further Bearish Momentum Hints at 139.00

Posted: 16 May 2019 06:58 AM PDT

Technical Analysis

All eyes on UK Prime Minister Theresa May meeting the 1922 Committee.

GBP/JPY Daily Chart highlighting a trend reversal.

See the Q2 GBP and JPY forecasts to learn what is likely to drive price action through mid-year!

See the DailyFX Economic Calendar for a comprehensive look at all key data releases.

GBP/JPY Daily Price Chart (Oct 18 – May 16, 2019)

Negative Break to The Downside

Since early Jan GBP/JPY has been trading to the upside from the higher-high created on Jan 25 at 144.84, to Feb 7 higher low at 141.01. On Feb 25 the pair opened with an exhaustion gap indicating that the uptrend would end soon.

GBP/JPY started to correct this movement on April 3 carving a lower high at 147.20 and a higher low on April 9 at 144.78, then to start a bearish movement creating on April 12 another lower high at 147.01 with a lower low on April 25 at 143.76.

On May 6 bearish momentum gained strength when the price opened with a breakaway downside gap, starting a sell–off so the price closed on May 10 at 142.98. On Monday GBP/JPY opened with a measuring gap at 142.77 encouraging the pair to move further to the downside breaking below the levels mentioned in last week article 141.90 and the 141.04 – 140.94 zone.

Alongside this development it's worth noting the Relative Strength Indicator (RSI), pointing lower since May 10, dipped yesterday below 30 into oversold territory.

Summary: Since yesterday GBP/JPY has been flirting with 140.50 therefore, if the price closes below the bearish movement might continue hinting towards 139.00. Support levels at 140.14, 139.94 and 139.47 are worth monitoring. If GBP/JPY closes above 140.50 it suggests the pair could rally towards the higher end of the trading range at 141.90 contingent on prices breaking through the resistance zone at 141.01 – 141.14 and then 141.53.

GBP/JPY will move to a higher trading range if it closes above 141.90.However, the pair need to clear resistance levels at 142.19 and 142.84 before testing 143.21.

Just getting started?See our beginners' guide for FX traders

GBP/JPY 2 Hours Price Chart (May 16, 2019)

Sellers Hesitation

Yesterday, GBP/JPY closed below 141.01 and headed towards 140.50.However, the price failed twice to close below this level. Today, the pair also failed twice to close below 140.50 and accompanied with RSI pulling back from the oversold territory to 34, this may reflect seller hesitation at this stage.

If buyers can take the initiative back and push GBP/JY above the140.90 – 141.04 zone, the next level of significant resistance is at 141,81. Resistance levels at 141.42 and 141.53 need to be monitored.

If bearish momentum gains strength and GBP/JPY break below the140.19 -140.14 zone, the pair could swing lower pushing towards 139.47 contingent on clearing support level at 139.94.

Written By: Mahmoud Alkudsi

Please feel free to contact me on Twitter: @Malkudsi

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2019-05-16 13:30:00

Negative Bias as Italy-German Yield Spread Widens

Posted: 16 May 2019 05:45 AM PDT

EURUSD Price, Chart and Analysis:

EURUSD fails to hold Wednesday's flip-up and nears 1.1200 again.
Wider German-Italy 10-year yield spreads a negative for EURUSD.

Q2 2019 EUR Forecast and USD Top Trading Opportunities

The closely watched Italy/German 10-year yield spread is pushing wider and remains a handful of basis points away from wides last seen in early December 2018, indicating heightened nervousness after comments from Italian deputy PM Matteo Salvini on Wednesday suggested that he would be prepared to break EU fiscal rules to drive unemployment lower. The differential between the two government benchmark bonds is widely followed by EUR traders and the wider the yield spread goes, the more the single currency comes under pressure. In recent months a spread of 330 basis points or more starts alarm bells ringing over Italian debt.

Italy-German 10-Year Bond Yield Spread

Keep up to date with all key economic data and event releases via the DailyFX Economic Calendar

EURUSD continues to struggle to move higher and may re-test recent lows in the coming days. The pair got a 30-40 tick boost yesterday afternoon after the US said it would suspend tariffs on EU and Japanese autos, but this uptick soon faded all the way back, indicating a lack of any real bullish intent. Any upside move will find resistance from a recent double-top around 1.1265 before 1.1300 and 1.1322 come into play. To the downside, the May 9 low at 1.1174 guards 1.1135 and 1.1110, the recently made two-year low.

EURUSD Daily Price Chart (September 2018 – May 16, 2019)

Retail traders are 52.2% net-long EURUSD according to the latest IG Client Sentiment Data, a bearish contrarian indicator. However recent daily and weekly positional changes give us a stronger contrarian bearish bias.

We run several Trader Sentiment Webinars every week explaining how to use IG client sentiment data and positioning when looking at a trade set-up. Access the DailyFX Webinar Calendar to get all the times and links for a wide range of webinars.

Traders may be interested in two of our trading guides – Traits of Successful Traders and Top Trading Lessons – while technical analysts are likely to be interested in our latest Elliott Wave Guide.

What is your view on EURUSD – bullish or bearish? You can let us know via the form at the end of this piece or you can contact the author at nicholas.cawley@ig.comor via Twitter @nickcawley1.

2019-05-16 12:30:00