EUR/USD denied by monthly R1

Technical Analysis

EUR/USD denied by monthly R1

“The dollar and euro had been stuck in a narrow range for a while, and positions tend to build up in such an environment. When stops are triggered under those conditions, currency movements tend to be volatile.”

- State Street (based on CNBC)

• Pair’s Outlook

  EUR/USD did not manage to pass through the supply zone formed by the weekly and monthly R1 levels and retreated to the weekly pivot point at 1.3833. Accordingly, the downside risks are now elevated. The currency pair may slide back to 1.38 before it follows the scenario suggested by the daily and monthly indicators, namely advance further north.

• Traders’ Sentiment

  The bearish with respect to the single European currency sentiment strengthened, as the percentage of open short positions increased from 66% up to 69%. Meanwhile, there was almost no change observed in the distribution between the buy (38%) and sell (62%) orders 100 pips from the spot price.

GBP/USD gravitates towards 1.66

“The pound is higher today as a result of a weak dollar across the board. The market is also thinking the U.K. will probably be the first major economy to increase rates. This drags pound-dollar higher as well.”

- Mizuho Bank (based on Bloomberg)

• Pair’s Outlook

  Originally, the Sterling did receive a strong upward impetus after touching upon the support at 1.66. However, the bullish momentum was exhausted, once the pair approached the weekly PP, and gave way for a sell-off. Now the Cable is again trading near the monthly PP and the up-trend, meaning there are still good reasons for the price to rise in the future.

• Traders’ Sentiment

  The bearish market participants are slowly but surely enhancing their advantage over the bullish traders. Currently the former take up 57% of the market, while the latter—43%. As for the orders placed 50 pips from the spot, the share of sell ones surged from 44% up to 59%.

USD/JPY plunges 100 pips

“Yen strength across the board has been exerting itself as the best way to play risk aversion. We are watching very closely the referendum over the weekend.”

- Australia & New Zealand Banking Group (based on Bloomberg)

• Pair’s Outlook

  Though we did expect USD/JPY to cover the distance between the monthly R1 and monthly PP with no real effort, at the same time we also considered the support at 102 to be tougher. Now an extension of the dip to the 50% Fibo seems to be as the most likely course of events. Additional demand is at 100.71/67, where the monthly S1 merges with the 200-day SMA.

• Traders’ Sentiment

  Traders have become somewhat less optimistic with regards to the U.S. Dollar, being that the share of long positions lost three percentage points. Still, the bulls are is a distinct majority—71%. Meanwhile, the number of buy orders (67.5%) considerably exceeds the number of sell ones (32.5%).

USD/CHF well-supported by 0.87

“With the approach of Sunday's referendum in Crimea, reports of Russian troop movements near the Ukraine border and escalating warnings of Western sanctions all contributed to renewed anxiety.”

- BNP Paribas (based on Reuters)

• Pair’s Outlook

  USD/CHF has finally tested the support around 0.87, which appears to be capable of stopping the decline seen since May of 2013 and capable of laying foundation for the bullish market. In order to confirm such long-term intentions, however, the currency pair will have to overcome a series of formidable resistances, with the nearest being the down-trend line at 0.8825. The next obstacle will then be the 2012 lows at 0.89.

• Traders’ Sentiment

  The ratio between the long (74%) and short (26%) positions is exactly the same as yesterday. In the meantime, more and more traders are planning to purchase the U.S. Dollar—the portion of buy orders reached 91% 50 pips from the spot.