Near-term Trade Setups in EUR/USD and NZD/USD

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EURUSD 120min Price Chart

EUR/USD Price Chart - 120min

In this week’s EUR/USD Price Outlook, we noted that our focus was higher in price with a breach above near-term resistance at 1.1424/32, “targeting 1.1462 backed by trendline confluence at ~1.1480 and the 61.8% retracement at 1.15 – look for a bigger reaction there IF reached.” Euro registered a high at 1.15 this week before reversing sharply with the decline breaking below the weekly opening-range low / slope support on Thursday.

The risk remains for further losses near-term but IF euro has turned the tide, price should stabilize ahead of 1.1301/18 into the start of the week. Topside objectives unchanged at 1.1424/32 with a breach above 1.15 needed to keep the long-bias viable. Weakness below this threshold exposes the 100% extension of the September decline at 1.1239. Review this week’s Strategy Webinar for an in-depth breakdown of these setup and more.

EUR/USD Trader Sentiment

EUR/USD Trader Sentiment

  • A summary of IG Client Sentiment shows traders are net-long EUR/USD – the ratio stands at +1.58 (61.2% of traders are long) – bearishreading
  • Traders have remained net-long since October 1st; price has moved 1.9% lower since then
  • Long positions are11.3% higher than yesterday and 11.0% lower from last week
  • Short positions are 15.6% higher than yesterday and 24.7% higher from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EUR/USD prices may continue to fall. Yet traders are less net-long than yesterday and compared with last week andrecent changes in sentiment warn that the current EUR/USD price trend may soon reverse higher despite the fact traders remain net-long.

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NZD/USD 240min Price Chart

NZD/USD Price Chart - 240min

Last week we highlighted the breakout potential in NZD/USD as Kiwi was approaching multi-month slope resistance with our focus on a break of the 6453-6640 range. Price ripped higher with the advance extending through the October opening-range highs into the start of November trade. A reversal off confluence resistance at 6811 has me in a short – half off at 6740 with stops a breakeven into the close of the week.

Keep in mind, New Zealand Dollar has broken above yearly slope resistance and leaves the broader outlook weighted to the topside while within this ascending pitchfork formation. From a trading standpoint, on the lookout for downside exhaustion on a move back towards the median-line for re-entries in the direction of the breakout – ultimately a topside breach of the upper parallel targets subsequent resistance objectives at 6851 and 6920/31.

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NZD/USD Trader Sentiment

NZD/USD Trader Sentiment

  • A summary of IG Client Sentiment shows traders are net-long NZD/USD – the ratio stands at +1.14 (53.2% of traders are long) – weak bearishreading
  • Traders have remained net-long since September 20th; price has moved 3.1% higher since then
  • The percentage of traders net-long is now its lowest since October 25th
  • Long positions are5.7% lower than yesterday and 21.9% lower from last week
  • Short positions are 35.5% higher than yesterday and 40.1% higher from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests NZD/USD prices may continue to fall. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current NZDUSD price trend may soon reverse higher despite the fact traders remain net-long.

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-Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michaelon Twitter @MBForex or contact him at mboutros@dailyfx.com