USD/JPY capped by 55-day SMA

Technical Analysis

EUR/USD plummets to 1.3770

“Euro seems to have formed a pretty good top, $1.3850 area, so I'm thinking to sell into any headline-induced spikes.”

- Jeffrey Halley, Saxo Capital Markets (based on CNBC)

• Pair’s Outlook

  As it turned out, the 1,5-month up-trend support line was not enough to prevent extension of the latest dip. Instead, the currency pair continued the decline until it reached the demand area at 1.3770, consisting of the recently breached falling trend-line and the weekly S2 level. Considering the weekly and monthly technical indicators, the Euro is unlikely to fall any lower; however, the longterm forecasts suggest the outlook is heavily bearish.

• Traders’ Sentiment

  As the common currency is rapidly depreciating, more and more bearish traders take profits and exit the market, resulting in the declining share of short positions. Five days ago their share amounted to 69%, now it is 65%.

GBP/USD challenges 1.65

“We are in for a little bit of dollar strength here.”

- National Australia Bank (based on Bloomberg)

• Pair’s Outlook

  The Cable is testing a formidable support zone near 1.65 at the moment, which is mainly created by the 2011 highs and the 100-day SMA. And even though a majority of the weekly and monthly technical studies are in favour of a rally right now, the fact that GBP/USD has recently broken out of the rising wedge to the downside suggest the sell-off is likely to persist.

• Traders’ Sentiment

  Similarly to what is happening in EUR/USD, here the bearish market participants are also closing their positions. Compared to last Friday, their percentage fell from 57% to 55%. Concerning the orders, while the share of buy ones increased to 57% 50 pips from the spot, in a wider range (100 pips from spot) their percentage dropped to 54%.

USD/JPY capped by 55-day SMA

“Yields in the U.S. have not risen as significantly [Thursday], so that typically means the upward trend in the dollar-yen has been a bit more subdued.”

- Societe Generale (based on MarketWatch)

• Pair’s Outlook

  Although previously the 55-day SMA did not seem to play an important role in determining direction of USD/JPY, for the past two days it has been preventing further advancement of the currency pair. Accordingly, there is an increased possibility of the exchange rate taking a step back to 102, where the 28.2% Fibonacci retracement level merges with the weekly pivot point.

• Traders’ Sentiment

  Despite USD/JPY’s hesitation to continue the rally, the market has become even more bullish with respect to the pair. The share of long positions went up from 71% to 74%. As for the orders placed, the difference between the buy (46%) and sell (54%) ones is presently not significant.

USD/CHF approaches 0.89

“From this point forward, at least for the time being, you will see a firmer tone to the dollar.”

- BMO (based on Reuters)

• Pair’s Outlook

  USD/CHF is currently eroding the one of the key resistance levels. If it succeeds, the next major obstacle to stand in this recovery’s way is going to be a cluster at 0.89. Apart from the 10-month down-trend line, it is also formed by the monthly PP, 2012 lows and the 55-day SMA. Consequently, there is a high chance of a noticeable setback once the pair approaches this area.

• Traders’ Sentiment

  SWFX traders’ sentiment returned to the levels seen five days ago, when 74% of market participants were holding bullish and only 26% were holding bearish views regarding USD/CHF. Speaking of the distribution between the orders to purchase (58%) and to sell (42%) the U.S. Dollar, the skew is towards the former.