USD/JPY's next destination—2008 high

Technical Analysis

EUR/USD stops at 1.2660

“The situation in Hong Kong is starting to weigh on people. The dollar just has had this massive rally. You are beginning to see some profit-taking.”

- BK Asset Management (based on CNBC)

• Pair’s Outlook

  EUR/USD failed to pierce the support at 1.2650 yesterday, but at the same time did not leave its vicinity, posting merely a 15-pip rally from the 2012 Q4 low. The immediate resistance is at 1.27, represented by the monthly S3, while a more significant supply level is considered to be a few steps higher, at 1.2750, where the weekly pivot point merges with the 2013 low and a falling resistance line drawn through the Aug 18 and Sep 4 peaks.

• Traders’ Sentiment

  The Euro stays more popular than the U.S. Dollar, since 60% of open positions on EUR/USD are long (62% yesterday). But the currency seems to be facing a major resistance area, being that 68% of pending orders are to sell the common currency.

GBP/USD is poised for a drop

“It just looks as though the market might have gorged itself on U.S. dollars a bit too much in recent weeks.”

- Westpac (based on Bloomberg)

• Pair’s Outlook

  Though the bulls were largely defeated last week, they are not giving up, but keep hindering further development of the dip. Nevertheless, the decline is expected to extend down to this year’s low at 1.6050. If a rally then follows, there will be a risk of GBP/USD forming a double bottom. However, the pair will have to break the falling trend-line at 1.63 and a cluster of resistances (including the neck-line) at 1.65 to fully realise the pattern’s upward potential.

• Traders’ Sentiment

  The distribution between the bulls and bears is more or less the same as 24 hours ago—58 and 42% respectively. As or the orders, the percentage of the ones to sell the British Pound fell from 81 to more moderate 66%.

USD/JPY’s next destination—2008 high

“Developments in Hong Kong have definitely caught the market’s attention; it’s helping drive the risk-off sentiment.”

- Toronto-Dominion Bank (based on Bloomberg)

• Pair’s Outlook

  Despite absence of any significant obstacles overhead, USD/JPY is finding it hard to gather enough strength to continue the advancement. Nonetheless, the technical indicators are mostly pointing upwards and 109 is acting as a reliable support, meaning the risks are still skewed in favour of a surge. The U.S. Dollar is likely to keep appreciating and the 2008 high at 110.72 remains a viable medium-term target.

• Traders’ Sentiment

  There are more and more SWFX traders entering the market counter the main trend—selling the Greenback against the Yen. Already 71% of open positions are short. But there are more buy orders (64%) than there are sell ones (36%).

USD/CHF approaches apex of a rising wedge

“Looking ahead, we expect data this week to show continued divergence in economic fundamentals to support the USD.”

- Barclays (based on CNBC)

• Pair’s Outlook

  By failing to overcome the resistance at 0.9530, USD/CHF has confirmed the up-trend, which was initiated at the very beginning of this quarter. Being that it is less sloped than the one pushing the currency pair higher, we are witnessing emergence of a rising wedge, which in turn implies a reversal. And if the support at 0.94 is violated, the sell-off may not be contained by the demand between 0.93 and 0.92—0.91 will also be in the danger zone.

• Traders’ Sentiment

  The SWFX market participants seems to have exploited the latest dip to go long the Buck—the portion of bulls grew from 55 to 58%. At the same time, the share of orders to purchase the Dollar went from 65 to 76%.