EUR/USD penetrates rising support line

Technical Analysis

EUR/USD penetrates rising support line

“I get the sense that there are people who think the euro is a sell, based on monetary policy-related topics.”

- Teppei Ino, Bank of Tokyo-Mitsubishi UFJ (based on CNBC)

• Pair’s Outlook

  As suspected, the Oct 6-15 up-trend was no longer a viable support and the bears pushed the price beneath it. Now EUR/USD is headed towards weekly S1 at 1.2619, but this level is unlikely to keep the currency pair away from this year’s low for long. On the other hand, the support at 1.25 will be much more difficult to breach, also considering that the monthly studies are still bullish, but eventually the bears are expected to gain the upper hand.

• Traders’ Sentiment

  Apparently, the market does not consider the Euro to be trading near the bottom—only 53% of open positions are long. And the sell-off may accelerate—most of the orders (60%) are to sell the common currency against the Buck.

GBP/USD dives back under the down-trend

“We’re still waiting for the right moment to buy dollar again. The decline could run a little bit further.”

- Credit Suisse Group AG (based on Bloomberg)

• Pair’s Outlook

  A step above the multi-month down-trend on Monday turned out to be a false break-out—the Pound is already trading below 1.61, which was supposed to act as a new floor. Accordingly, GBP/USD is now likely to slide down to 1.5870/50 (2014 and 2013 Q4 lows), as suggested y the daily and weekly technical indicator. However, the price may take a break at 1.5960/30, where the support is implied by the weekly and monthly S1 levels.

• Traders’ Sentiment

  A substantial majority of the SWFX market participants expects the Sterling to outperform the US Dollar—64% of open positions are long. But they are likely to be closed very soon—as many as 70% of all the commands placed are to sell the Pound.

USD/JPY takes off from 106.50

“The test and hold of the January highs at [¥]105.48 must be seen as bullish. When old resistance turns to new support, that is the hallmark of a healthy bull trend.”

- Merrill Lynch (based on MarketWatch)

• Pair’s Outlook

  The US Dollar maintains the upward direction after retreating to the support at 106.50 earlier this week. And since there are no significant resistances nearby and most of the studies on the weekly time-frame are giving ‘buy’ signals, the rally should extend at least up to 108. There the pair will already face a dense supply area, created by the monthly pivot point, weekly R1 and 23.6% Fibo retracement of the Jul-Oct up-move.

• Traders’ Sentiment

  The market remains undecided—45% of positions are long and 55% are short. However, there was a significant increase in the percentage of buy orders set 100 pips from the spot price—from 50 to 59%.

USD/CHF back on track towards 0.97

“Market players are hesitant to build positions ahead of next week's Federal Reserve meeting, especially as officials have sent dovish signals recently.”

- IG Securities (based on Reuters)

• Pair’s Outlook

  USD/CHF built on the gains made on Tuesday and thus reached the upward-sloping trend-line it has recently breached. Consequently, there may be a sell-off from 0.9571, but shallow, since the Greenback is now targeting the key resistance at 0.97, where the 2014 high coincides with the weekly R2 and monthly R1. And while the weekly technical favour the Dollar, on a higher time-frame they portend a decline.

• Traders’ Sentiment

  The ratio of bulls (58%) to bears (42%) remains constant, even though USD/CHF is not trading flat. In the meantime, 58% of the pending orders near the current market price are to purchase the Greenback against the Swiss Franc.