EUR/USD erodes 1.25

Technical Analysis

EUR/USD erodes 1.25

“We've had surprises from central banks last week in the form of Riksbank and the Bank of Japan, and pressure is obviously on the ECB.”

- Barclays (based on CNBC)

• Pair’s Outlook

  EUR/USD has already managed to update this year’s minimum today, but for now the support at 1.25 can still be considered to be intact. However, if the currency pair closes beneath this mark today, there will be few doubts the sell-off is going to extend further, namely down to 1.24. On the other hand, in case the October low withstands the selling pressure, the Euro will have a good opportunity to return to 1.2740.

• Traders’ Sentiment

  While the distribution between the longs (58%) and the shorts (42%) has been more or less stable, the percentage of commands to purchase the single currency against the Buck has soared from 31 to 69% since the previous report on Friday.

GBP/USD to stay between 1.6050 and 1.5850

“Sterling specifically has some issues which really come down to little more than the fact that the date when the BoE is likely to hike rates just keeps being pushed further and further back.”

- Bank of New York Mellon (based on Reuters)

• Pair’s Outlook

  Given the density of supply around 1.6050, the bias is to the downside. Apart from the multi-month down-trend, this resistance is created by the monthly pivot point and several other studies. Nevertheless, the bearish momentum may find it difficult to push the Sterling below the support at 1.5850, where the 2013 Q4 low merges with this year’s trough and monthly S1. Accordingly, we can expect GBP/USD to remain range-bound in the coming days.

• Traders’ Sentiment

  The SWFX market preserves a positive attitude with respect to the British Pound—as many as 65% of open positions are long. As for the orders, there is no real difference between the buy (47%) and sell (53%) ones.

USD/JPY closes the bullish gap

“In a world where the Japanese Central Bank is accelerating purchases and the U.S. has just completed purchases, that doesn’t bode particularly well for the yen.”

- Interactive Brokers (based on MarketWatch)

• Pair’s Outlook

  Since USD/JPY opened this week with an upside gap, there is likely to be a correction at least to 112, from where the pair will be expected to resume the rally. Subsequently, considering there are no significant resistances nearby, the US Dollar should reach 115 with relative ease. However, the currency may come under strong selling pressure here, as this supply area is represented by the 2007 Dec high and monthly R1.

• Traders’ Sentiment

  An overwhelming majority of the SWFX market participants believes the Greenback has already reached the top and the currency is therefore bound to decline versus the Japanese Yen—at the moment 70% of positions are short.

USD/CHF approaches 0.97

“Market attention will move back to economic fundamentals this week, especially given the U.S. employment report. Expectations of a firm reading will likely support the dollar.”

- Barclays (based on Bloomberg)

• Pair’s Outlook

  USD/CHF has finally returned to this year’s main resistance, which in turn is the key to 2013’s high at 0.9840. Being that this level has proven to be respected by the market, we should not rule out a pull-back to 0.9600/0.9550 before 0.97 finally gives in. At the same time, if neither the weekly nor the monthly pivot points provide sufficient demand, the bears may throw the pair back to 0.9460 (55-day SMA and 23.6% Fibo).

• Traders’ Sentiment

  For the time being the traders are unable to reach a consensus—51% of positions are long and 49% are short, meaning the overall sentiment is neutral. A similar picture is observed with the pending orders—46% to buy and 54% to sell the Buck.