USD/JPY is calm before the storm

Technical Analysis

EUR/USD pushes through 100-day SMA

“We continue to believe that the ECB is running unnecessary risks in its slow response to low inflation and expect nonconventional monetary easing measures before year-end.”

- Barclays (based on CNBC)

• Pair’s Outlook

  As the 55-day SMA failed to underpin the pair, now it is 100-day SMA’s turn to try to prevent further depreciation of the Euro. However, if this is not the case, the next significant support EUR/USD is going to encounter will be standing 100 pips to the South, where the weekly S2 level merges with the 200-day SMA. Given that the weekly and monthly technical indicators are bullish, there is a good chance the price will recover from there.

• Traders’ Sentiment

  The SWFX traders are getting less and less convinced that the Euro is going to fall relative to the U.S. Dollar; but overall the bears are still in a distinct majority, as they take up 59% of the market, and this is a significant advantage over the bulls (41%).

GBP/USD puts pressure on 1.6590

“The PMI data saw some long positions in the pound being pared. The data was not bad but helped the market understand that the recovery we have seen so far may have topped out.”

- Caxton FX (based on Reuters)

• Pair’s Outlook

  The monthly pivot point failed to keep GBP/USD afloat and thereby exposed 1.6590/87. And even though this support area is quite dense, consisting of the 55-day SMA and weekly PP, the Sterling is capable of falling deeper, potentially down to 1.65, where it has much better chances of receiving a strong bullish impetus. The reason is that near this round level we have the 100-day SMA, 2011 highs and monthly S1.

• Traders’ Sentiment

  The sentiment towards the Pound returned from moderately bearish to strongly bearish, being that the percentage of short positions open on GBP/USD has surged from 58% up to 68% since the previous report.

USD/JPY is calm before the storm

“With the Fed moving toward an exit from stimulus, the dollar should move higher in the medium to longer term.”

- Sumitomo Mitsui Trust Bank (based on Bloomberg)

• Pair’s Outlook

  The bullish momentum we have been observing this week disappeared as the pair approached a key resistance represented by 104. But there are also fundamental reasons that keep traders from making bets for now, namely NFP. Once the data is out, USD/JPY will be free to demonstrate elevated volatility again. The main scenario is still a break-out to the upside towards 105.50, but it will mainly depend on market’s interpretation of the new figures.

• Traders’ Sentiment

  Even though the share of longs (62%) is presently well below its 10-day average (69.5%), the sentiment with respect to the U.S. Dollar is largely bullish. At the same time the resistance to a rally is weakening—the share of sell orders dropped from 61% to 49%.

USD/CHF extends recovery from 0.8821/04

“A number [of U.S. non-farm payrolls] near consensus would provide more reassurance that the U.S. economy is emerging from its winter freeze and would be sufficient to maintain and extend the USD's gains seen earlier this week.”

- BNP Paribas (based on CNBC)

• Pair’s Outlook

  While USD/JPY is hesitant to advance at the moment, USD/CHF is running wild. Despite a variety of studies concentrated near 0.89, including the 2012 lows, 11-month down-trend line, monthly R1 and 100-day SMA, the currency pair continues gaining ground. If the resistance at 0.8937/16 is overcome in the nearest future, the 200-day SMA together with the monthly R2 at 0.9028/13 will most likely be the next target.

• Traders’ Sentiment

  The portion of bulls lost three percentage points, but still an overwhelming majority of traders expect further strengthening of the greenback, specifically 70% of them. The distribution between the buy and sell orders is 58% and 42% respectively.