USD/JPY slipped beneath 109

Technical Analysis

EUR/USD finds support at 1.26

“Bottom line for the euro is that Draghi needs to convince investors that ECB action will be large enough to boost inflation expectations, and that policy responses will continue to escalate if inflation expectations were to fall further.”

- BNP Paribas (based on CNBC)

• Pair’s Outlook

  Continuation of Tuesday’s sell-off did not take place yesterday—the support at 1.26, represented by the weekly S1 and Bollinger band, remains intact. In case of a rally from here the currency pair will encounter 1.2660—2012 Q4 low. If the bulls keep pushing the price higher—there is a cluster of resistances at 1.2750, consisting of the 2013 low, weekly PP and falling trend-line that should prevent further appreciation of the Euro.

• Traders’ Sentiment

  The SWFX market participants are undecided with respect to the Euro, being that the amounts of long and short positions open are equal. However, there are more sell orders (64%) than there are buy ones (36%).

GBP/USD to be capped by 1.63

“Sterling’s past moves have reduced the risk of inflation increasing sharply, despite the strong growth in employment and the overall economy.”

- Kristin Forbes, BOE policy maker (based on Bloomberg)

• Pair’s Outlook

  After hitting the weekly S1 during yesterday’s trading sessions, GBP/USD is currently moving counter the major trend—towards the negatively-sloped line at 1.63. Considering that this resistance is also reinforced by the monthly PP and 23.6% Fibo, the chance of the Sterling rising above this supply area is low. Instead, the pair is expected to resume the decline and re-visit this year’s lowest point at 1.6050, as suggested by the daily and weekly studies.

• Traders’ Sentiment

  Just like in EUR/USD, here the difference between the bulls and bears is also insignificant—it amounts only to 10 percentage points. As for the pending orders, there is a slight advantage of sell commands (57%) over the buy ones (43%).

USD/JPY slipped beneath 109

“The dollar is consolidating after reaching 110 yen, and other currencies which were a bit oversold against the dollar are being bought back. Investors are adjusting their positions ahead of the ECB meeting as the dollar’s recent rise has been quite rapid.”

- FX Prime (based on Bloomberg)

• Pair’s Outlook

  As it turned out, USD/JPY did not have to touch the 2008 high in order to come under strong selling pressure. Right now the spot is 100 pips below the Tuesday’s close, as the weekly PP and 2008 Sep high at 109 failed to provide sufficient support. At the moment the U.S. Dollar is facing the weekly S1 at 108.50, but this downward correction has the potential to extend to 108. Here the bears should be stopped by the monthly PP and two-month up-trend.

• Traders’ Sentiment

  As a result of a large drop in price there are considerably less bears in the market than there were yesterday. However, the short positions still constitute a majority—60%. There are also more orders to sell the Buck—65% of the total amount.

USD/CHF intimidated by 0.9580

“A negative interest rate is in our arsenal of instruments. We don’t exclude any measure to meet our mandate of price stability.”

- Thomas Jordan, SNB President (based on Bloomberg)

• Pair’s Outlook

  USD/CHF keeps standing close to the resistance at 0.9586/78. If the sellers here manage to send the price down to 0.9450—the risk of a break-out to the downside will substantially increase, since the market will confirm formation of a rising wedge. Conversely, the if Greenback continues to appreciate and ignores the nearby resistances, the next target will be the 2013 Q3 high and weekly R3 at 0.9750 before the 2013 high 0.9840.

• Traders’ Sentiment

  While the distribution between the bulls and bears levelled off throughout other currency pairs, in USD/CHF the former improved their positions—now they take up 67% of the whole market (62% yesterday).