GBP/USD poised for more gains

Technical Analysis

EUR/USD confirmed 200-day SMA as resistance

“The medium-term view is still one of a lower exchange rate given the monetary policy divergence.”

- JPMorgan (based on CNBC)

• Pair’s Outlook
  
  For the time being the 200-day SMA successfully carries out its mission, namely is not letting the Euro to advance further, even though the monthly studies are mostly bullish. If 1.37 continues to cap the rate, EUR/USD should soon return to the 2014 lows just below 1.35, a level that needs to be overcome in order for the bearish intentions to be confirmed. Otherwise there may be a re-test of the 100-day SMA at 1.3737.

• Traders’ Sentiment
  
  The advantage of the bears seen yesterday has been almost fully erased during the last 24 hours, leaving only an insignificant difference between the amounts of long (45%) and short (55%) positions.

GBP/USD poised for more gains

“U.K. manufacturing continued to flourish in June, rounding off one of the best quarters for the sector over the past two decades.”

- Markit (based on MarketWatch)

• Pair’s Outlook
  
  The Great British Pound continues to strengthen after crossing the 2009 high, and the currency seems to be unlikely to stop until it reaches the edge of the bullish channel at 1.74. This is evidenced by a majority of the technical indicators giving ’buy’ signals, though the advantage is not overwhelming. The immediate resistance is at 1.7182/72 (weekly R3 and Bollinger band), followed by the monthly R1 at 1.7248.

• Traders’ Sentiment
  
  An overwhelming majority of the SWFX market participants consider the Sterling to be overvalued, namely 74% of them, and their number is increasing. As for the orders, the gap between the buy (45%) and sell (55%) ones is only marginal.

USD/JPY rebounds from 101.20

“I can’t see volatility getting any lower. The market is pricing in very, very easy monetary policy forever in the U.S.”

- Thomas Averill, Rochford Capital (based on Bloomberg)

• Pair’s Outlook
  
  USD/JPY seems to be well-underpinned by 101.20, but it could be only a pull-back to the recently breached up-trend before another, even stronger, bearish wave. But this will be decided once the pair rises up to 102.15. If the U.S. Dollar continues the recovery from there, there will be a high possibility of the price re-visiting this year’s high at 104. Conversely, should the bears prevail, the support represented by 2014 lows will be expected to be broken.
  

• Traders’ Sentiment
  
  Traders appear to have been encouraged by USD/JPY finding support—the percentage of long positions went up from 70% to 72%. Meanwhile, the share of buy orders 50 pips from the spot plummeted from 70% to 59%.

USD/CHF faces demand at 0.8870

“The U.S. data has been weakening somewhat, and that is accelerating dollar selling. We need some hawkish signals from the Fed to change that trend.”

- Barclays (based on Bloomberg)

• Pair’s Outlook
  
  Right now the 100-day SMA is coping with the selling pressure that was a result of a failure at 0.90. However, taking into account a cluster of resistances at 0.8928/16, the likelihood of a robust recovery from here is low, and a breach of 0.8871/64 given these conditions seems to be a more probable course of events; also being that the monthly indicators are bearish. USD/CHF should then target the monthly S1 at 0.8808.

• Traders’ Sentiment
  
  The distribution between the bulls and bears in the market is more or less the same as yesterday—74% of traders expect the greenback to appreciate and 26% think otherwise, which is a large deviation from their 10-day averages of 68.5% and 31.5% respectively.