EUR/USD underpinned by 1.29

Technical Analysis

EUR/USD underpinned by 1.29

“I would prefer that we start to raise rates sooner rather than later.”

- President Charles Plosser, FRB of Philadelphia (based on Bloomberg)

• Pair’s Outlook

  There is likely to be a deeper correction than the one seen on Friday after a massive sell-off on Sep 4. The Euro will then resume the decline and reach its long-term target, namely the 2013 low at 1.2750. Considering there is a tough resistance at 1.30, represented by the weekly PP and monthly S1, the price might rally some 50-60 pips from today’s open. Afterwards EUR/USD is expected to succeed at breaking the recent low and monthly S2 at 1.29.

• Traders’ Sentiment

  Apparently, the traders were not eager to alter their positions this weekend, being that the distribution between the longs and shorts is exactly the same as last week—60 and 40% respectively. But at the same time, the share of sell orders increased, from 62 to 74%.

GBP/USD opens with a bearish gap

“Realized volatility in GBP, with a downside bias, likely will increase for an extended period.”

- Barclays (based on CNBC)

• Pair’s Outlook

  The Cable started this week beneath the 2014 low (1.6250), as result of a 150-pip large downside gap. The Sterling should now try to negate this loss in the nearest future—to move North until the monthly S2 and weekly PP at 1.63. And even though the monthly technical indicators are still mostly giving ‘buy’ signals, the overall outlook will remain bearish, with the 2013 Q4 low at 1.5850 being the next likely target.

• Traders’ Sentiment

  The sentiment among the SWFX market participants is bullish towards GBP/USD—66% of open positions are long and 34% are short. As for the orders, 57% are to buy and 43% are to sell the Pound.

USD/JPY stops advancement at 105.50

“The collapse of Japan’s previously large current-account surplus is the main medium-term driver behind a weaker yen.”

- Commonwealth Bank of Australia (based on Bloomberg)

• Pair’s Outlook

  For now the bulls seem to be unable to overcome the resistance at 105, even though the technical studies are in favour of a rally on all relevant time-frames. But eventually the buying pressure should prevail. Once the 2014 Q1 high is out of the way, the monthly R2 and weekly R1 around 106 will be the next objective, though we may see a pull back to the demand area at 104 (2014 Q2 high) before this happens.

• Traders’ Sentiment

  There is still no significant difference between the amounts of long and short positions—they take up 47 and 53% of the market respectively. Concerning the orders, 65% are set to purchase the Greenback against the Yen.

USD/CHF looks North

“What we saw today (on Friday) called off the dogs to some degree and took the heat down a notch or two from investors' concern about rate hikes.”

- U.S. Bank Wealth Management (based on Reuters)

• Pair’s Outlook

  The currency pair has confirmed the monthly R2 at 0.93 as a support level after breaching it to the upside. USD/CHF should now look for a contact with the 2013 Sep high at 0.9450, regardless of the monthly indicators. However, the U.S. Dollar will have to break the monthly R3 at 0.94 first. But if the current upward momentum is not sustained, there is a good possibility of the demand at 0.9250 preventing the dip from extending lower.

• Traders’ Sentiment

  The SWFX has not come to a consensus yet with respect to the future of USD/CHF, being that the shares of bullish (52%) and bearish (48%) traders are nearly equal. In the meantime, 56% of all commands 100 pips from the spot are to buy the Buck.