Technical Analysis

EUR/USD turned around ahead of monthly S1

EURUSD

“European policy makers appear to be stuck in a wait-andsee mode as they hope that economic data begins to improve, alleviating the need for an aggressive monetary policy.”

- BK Asset Management (based on MarketWatch)

  • Pair’s Outlook

    As it turned out, EUR/USD did not carry on with the decline. Instead, it bounced off the 100-day SMA despite the bearish daily technicals and recovered back to the 55-day SMA. If this resistance is breached, as implied by the weekly and monthly studies, the next supply area the Euro should challenge is at 1.3815/1.3783, the monthly PP and weekly R1.

  • Traders’ Sentiment

    The market appears to be quite sensitive to appreciation of the single currency. Once it increased in value (by 50 pips), the share of bearish traders instantly jumped by three percentage points to 60%, though it is still below the 10-day average of 62%. The portion of sell orders also increased, from 48% to 57%.

GBP/USD negates losses

GBPUSD

“The latest PMI data will embolden the doves on the MPC to argue there is no need to raise interest rates this year if growth is slowing to more sustainable levels.”

- UBS (based on Reuters)

  • Pair’s Outlook

    Although there were still some 40 pips between the price and the nearest significant support, GBP/USD took a U-turn and returned to the monthly pivot point. This was foreseen by most of the technical indicators, but was expected to happen a little later. Still, there are enough resistances capable of halting Sterling’s advancement, such as 1.6635 or 1.6735 (rising trend-line).

  • Traders’ Sentiment

    Similarly to the reaction in EUR/USD, a slight up-move in GBP/USD caused a considerable skew in favour of the short positions. Right now they constitute 64% of the market, while yesterday only 59% of it. Meanwhile, the difference between the buy and sell orders remains insignificant.

USD/JPY to face 102.72/70

USDJPY

“The low volatility in FX markets generally should be mildly supportive for carry trades and indirectly for dollar/yen.”

- Standard Chartered Bank (based on CNBC)

  • Pair’s Outlook

    It seems that the 100-day SMA will be insufficient to stop the U.S. Dollar from falling lower. However, there is a formidable support level at 102.72/70 (consisting of the monthly PP, weekly S1 and 20-day SMA) and it should be able to restore the upward momentum. This view is also reinforced by the technical indicators, majority of which are pointing north at the moment.

  • Traders’ Sentiment

    There seems to be less people wishing to exploit depreciation of the buck. On the contrary, they are getting less and less convinced that the currency is able to recover. During the last five trading days the percentage of long positions, even though still substantial, declined from 75% down to 71%.

USD/CHF capped by 0.8940/23

USDCHF

“The jobs data confirmed the moderate recovery in the U.S. economy, but market expectations had been way too high.”

- Mizuho Securities (based on Bloomberg)

  • Pair’s Outlook

    A resistance zone at 0.8940/23, mainly formed by the monthly R1 and 100-day SMA, proved to be tough yesterday by throwing USD/CHF beneath the 2012 lows at 0.89. Now, if the 55-day SMA fails to underpin the exchange rate and to rekindle interest in buying the greenback, the sell-off will likely persist at least until the monthly PP at 0.8813 is reached.

  • Traders’ Sentiment

    While some of the traders start doubting bullishness of USD/JPY, they are much more certain that the U.S. Dollar is going to outperform the Swiss Franc. Firstly, 74% of open positions are long. Secondly, 77% of orders placed 100 pips from the spot price are to purchase the Dollar against the Franc.

This overview can be used only for informational purposes. Dukascopy SA is not responsible for any losses arising from any investment based on any recommendation, forecast or other information herein contained.

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