USD/JPY closes the bullish gap

Technical Analysis

EUR/USD to challenge 23.6% Fibo

“We think it is still possible for the Fed to start tightening in the first half of next year. As the market re-examines the timing, the dollar is still expected to rise against the euro and yen over three-to-six months.”

- Nomura Holdings (based on Bloomberg)

• Pair’s Outlook

  EUR/USD respected an accelerated up-trend that connects the lows seen on Oct 6 and 15, and the pair is now moving higher. The support at 1.2750 was also reinforced by the weekly PP and 2013 low. However, the upside potential of the Euro should be limited by the resistance between 1.2890 and 1.2850, which is created by the weekly R1, 55-day SMA and 23.6% Fibonacci retracement of the May-Oct down-move.

• Traders’ Sentiment

  There has been a slight shift in favour of the short positions, as their share went up by two percentage points. Nonetheless, the difference between the amounts of the bulls (47%) and the bears (53%) remains insignificant.

GBP/USD open a door to 1.63

“The downside risk for sterling/dollar is that the two dissenting voters within the MPC might look at some of the recent economic data and switch their votes.”

- FXTM (based on CNBC)

• Pair’s Outlook

  Although the four-month down-trend at 1.61 was supposed to keep the downward momentum intact, yesterday it was breached to the upside. The next closest resistance is at 1.6185 represented by the weekly R1, but the possibility of a rally higher, up to 1.63, is high. Here the bullish run should come to an end, being that the supply is implied by the monthly PP, weekly R2 and 55-day SMA. Moreover, the weekly technical indicators are mostly bearish.

• Traders’ Sentiment

  The majority turned out to be right—the British Pound outperformed the Greenback, while most (60%) of the open positions were long. On the other hand, there is an increasing number of sell orders nearby, currently standing at 60%,

USD/JPY closes the bullish gap

“I think there is a real risk that if there is a downside surprise in the CPI this could have an outsized reaction in the U.S. Treasury market and dollar. It will push Treasury yields lower and could lead to a softer dollar. There could be a real risk that 105.50 yen support could be breached.”

- Paresh Upadhyaya, Pioneer Investments (based on CNBC)

• Pair’s Outlook

  Despite the absence of any notable levels USD/JPY came under strong selling pressure and as a result, retreated back to a cluster of supports at 106.80/60. If the demand here is not enough to stop the decline, the area between 106 and 105.50 (weekly and monthly S1, 50% Fibo) will be expected to prevent further depreciation of the US Dollar, just like it did last week. Meanwhile, even lower, at 104.50, there is a cluster created by the 100-day SMA and 61.8% Fibo.

• Traders’ Sentiment

  A dip in the value of the Buck brought the distribution between the bulls and the bears into balance, as the difference between them narrowed to insignificant eight percentage points. As for the orders, 51% of them are to buy and 49% are to sell the Dollar.

USD/CHF falls under 0.9450

“The dollar will probably struggle a little bit at least until after the Fed meeting next week.”

- National Australia Bank (based on Bloomberg)

• Pair’s Outlook

  USD/CHF failed to gain a foothold above 0.9450—it has already nullified the progress made during the last two days of the previous week. The currency pair is likely to find support at 0.9370 (weekly S1 and 55-day SMA), but we cannot rule out a deeper dive, down to the 38.2% Fibo of the May-Oct advancement. Nevertheless, a sell-off from this year’s high is still considered to be a correction rather than a reversal of the broad USD strengthening.

• Traders’ Sentiment

  The SWFX market is largely optimistic regarding the perspectives of USD/CHF—as many as 64% of traders are holding long positions at the moment. As for the commands, right now there is no real difference between the buy (52%) and sell (48%) ones.