USD/JPY charges towards 108 at full speed

Technical Analysis

EUR/USD rebounds from 1.29

The FX market “has surged back into life courtesy of the evident and still unraveling divergence between the U.S. and a host of other major economies and their monetary policies or political developments.”

- National Australia Bank (based on Bloomberg)

• Pair’s Outlook

  The bears failed to push through the support at 1.29 (monthly S2), thus allowing a small upward correction to take place last Friday. The current rally may extend even further, but EUR/USD will most likely make a U-turn before rising above the monthly S1 at 1.30. Still, additional supply that safeguards negative for the currency pair outlook is supposed to be at 1.31, where the weekly R3 merges with the 2013 Sep low.

• Traders’ Sentiment

  The SWFX market participants are moderately bullish with respect to the European currency—58% of traders expect it to gain ground against the Buck. Concerning the orders, a majority (63%) is to sell the Euro.

GBP/USD faces 1.6250

“It is very rational that the one-week implied vols are elevated as international investors are waking up to all the issues and the implications from the vote.”

- CIBC World Markets (based on Reuters)

• Pair’s Outlook

  The Cable has finally reached 1.6250, after encountering a dense demand area at 1.61. Ideally, this resistance should prevent further appreciation of the Sterling, which in turn is expected to start negating the recent gains, as suggested by the near-term technical indicators. This implies a re-test and a subsequent breach of monthly S3. GBP/USD will then be in a good position to visit 1.5850—2013 Q4 low.

• Traders’ Sentiment

  Though the percentage of the bulls has somewhat declined, there are still more proponents of a rally—62% of the market. As for the commands set, there is presently no difference between the amounts of buy (46%) and sell (54%) ones.

USD/JPY charges towards 108 at full speed

“Data in the U.S. has been coming in stronger, and they point to a continuation of recovery. Dollar bulls are finally being vindicated as the markets are pricing in a more hawkish tone by the Fed.”

- Mizuho Bank (based on CNBC)

• Pair’s Outlook

  The U.S. Dollar is getting close to a significant resistance zone around 108, formed by the weekly R1, monthly R3 and Bollinger band. Accordingly, we should be wary of a downward correction, even though there are almost no ‘sell’ signals among the technical studies. If there is a sell-off, it should be stopped before the support at 105.44/12 (two-month up-trend, monthly R1 and 2014 Q1 high) is violated.

• Traders’ Sentiment

  At the moment a large portion of the traders sees the latest advancement as overextended—as many as 72% of open positions are short. In the meantime, 59% of pending orders are to purchase the Dollar.

USD/CHF to recover from 0.93

“The main macro trigger is rising U.S. yields.”

-Societe Generale (based on CNBC)

• Pair’s Outlook

  USD/CHF continues to consolidate, as the bulls are dormant after a precipitous Sep 4 rally. However, as long as the support at 0.93 (weekly S1 and monthly R2) remains intact, the outlook will be considered favourable for the Greenback. Still, in order to confirm its bullish intentions, the pair has to surpass the resistances at 0.94 (monthly R3) and then at 0.9450 (2013 Sep high). Then we will be looking at the 2013 high at 0.98 as the next potential target.

• Traders’ Sentiment

  While there is no significant gap between the bullish (53%) and bearish (47%) market participants, the orders to buy the U.S. Dollar (62%) notably outnumber the ones to sell the currency (38%) against the Swiss Franc.