GBP/USD testing durability of a down-trend

Technical Analysis

EUR/USD to respect resistance at 1.29

“Constructive ambiguity could suit Draghi at the moment as it puts downward pressure on the euro, which gives him some time to hope that deflationary forces ease.”

- National Australia Bank (based on CNBC)

• Pair’s Outlook

  The situation has not developed much since the previous report, and EUR/USD is still considered bearish. The downward-sloping trend-line together with the monthly S2 at 1.29 should keep the bulls at bay, while the bears are expected to push the price towards the 2013 low at 1.2750. Additional supports can be found at 1.27 (monthly S3) and at 1.2650 (2012 Q4 low), but there is a high chance they are going to be violated in the coming weeks.

• Traders’ Sentiment

  As EUR/USD exhibits no volatility, there are also no changes in the distribution between the bulls and bears—59 and 41% respectively. On the other hand, the gap between the buy and sell orders narrowed from 34 to 26 percentage points.

GBP/USD testing durability of a down-trend

“We expect sterling/dollar rebounds to remain limited, keeping the downtrend intact.”

- Morgan Stanley (based on Reuters)

• Pair’s Outlook

  GBP/USD launched yet another attack on the down-trend at 1.64, which has been intact since the beginning of July. If the currency pair succeeds, the resistance at 1.65 will have to come into play. This supply level is created by the 38.2% Fibonacci retracement and weekly R1 and should thus prompt a sell-off back to this year’s low at 1.6050. However, most of the monthly technical indicators still protest against such a course of events.

• Traders’ Sentiment

  There are slightly less long positions (57%) than yesterday (59%), but the overall sentiment towards GBP/USD in the SWFX market stays bullish. At the same time, the share of orders to sell the Pound grew from 52 to 61%.

USD/JPY undergoes correction

“Currency levels appropriate for reflecting Japan’s economic fundamentals are 90-100 yen to the dollar.”

- Japan Center of Economic Research (based on Bloomberg)

• Pair’s Outlook

  USD/JPY is getting further and further away from 109, but nonetheless retains bullish long-run outlook. The nearest support is at 108.40 represented by the weekly PP, though the current dip can easily extend down to the monthly R3 at 108. In case both these levels fail to underpin the pair, there is a rising two-month line at 106 that should be able to restore the upward momentum. Meanwhile, the weekly and monthly studies are mostly bullish.

• Traders’ Sentiment

  A notable majority of the SWFX traders reckon the Buck to be overvalued relative to the Yen, namely 66% of them. In the meantime, 68% of orders placed 100 pips from the spot are to purchase the U.S. Dollar.

USD/CHF still capped by monthly R3

“If the dollar were to strengthen a lot, it would have consequences for growth.”

- William Dudley, President of FRB of New York

• Pair’s Outlook

  The U.S. Dollar continues to consolidate beneath 0.94, being unable to climb over the monthly R3 and 2013 Sep high. But at the same time, none of the important supports have been broken, and the medium-term positive outlook will not be invalidated unless the up-trend and monthly R2 at 0.93 are broken to the downside. USD/CHF will then be expected to fall down to 0.91—monthly S1, 100-day SMA and six-month bullish line.

• Traders’ Sentiment

  Although USD/CHF is trading flat, the difference between the bulls and bears is now significant—14 percentage points. Concerning the orders, 69% of them are set to buy the U.S. Dollar against the Swiss Franc.