EUR/USD starts week with bearish gap

Technical Analysis

EUR/USD starts week with bearish gap

“Draghi and the situation in Ukraine are going to keep the euro heavy.”

- RBS (based on CNBC)

• Pair’s Outlook

  Friday’s price action and a large downside gap confirmed an assumption that there is a formidable resistance area between 1.39 and 1.395. Accordingly, while there could be a rally today in order to cover the distance between last week’s close and this week’s open prices, it is unlikely to extend beyond 50 pips. Despite the ‘buy’ signals on the weekly and monthly time-frames the outlook on the single European currency is still considered to be bearish.

• Traders’ Sentiment

  There was a slight decrease in the number of short positions, from 71% down to 68%, and the sentiment with respect to EUR/USD remains strongly bearish. Meanwhile, the difference between the buy (45%) and sell (55%) orders is currently insignificant.

GBP/USD finds support at 1.67

“Sterling is going to nudge higher throughout the course of this month.”

- Argentex (based on Bloomberg)

• Pair’s Outlook

  Although GBP/USD received a strong bearish impetus after a test of the February’s high, today the currency pair is not keen on declining, as it seems to have found support at 1.6704 (weekly PP). Nevertheless, the downside risks are significant and there is still a high probability of the price falling down to 1.6642/35, where it will meet the monthly PP and 55-day SMA. Additional support is beneath 1.66—up-trend line and 100-day SMA.

• Traders’ Sentiment

  The gap between the amounts of longs and shorts narrowed, but there are still notably more bears (60%) in the market than there are bulls (40%). In the meantime, the distribution between the buy and sell orders 100 pips from the spot price is 55% and 45% respectively.

USD/JPY struggles to rally

“Given the technical damage inflicted on the dollar and the decline in U.S. interest rates, it is tempting to look for the greenback's losses to accelerate.”

- Brown Brothers Harriman (based on Reuters)

• Pair’s Outlook

  In order for USD/JPY to preserve a bullish bias, it is required to rebound from 101.27/19, the key support area that consists of the rising trend-line, 200-day SMA and 50% retracement of the November-December up-move. However, for now the currency pair hesitates to start a recovery, meaning that the demand here is not as strong as it initially appeared. If the sell-off drags on, the next significant line in the sand is the monthly S2 and 61.8% Fibo at 100.

• Traders’ Sentiment

  Just as last week an overwhelming majority of the SWFX market participants are holding bullish views towards USD/JPY, specifically 73% of them. At the same time, the distribution between the orders is heavily skewed towards the buy ones (73%).

USD/CHF targets down-trend at 0.863

“The Fed minutes suggested that the market may have been off-base in beginning to price in a rate hike sooner than previously expected.”

- Commonwealth Foreign Exchange (based on MarketWatch)

• Pair’s Outlook

  After an explicitly bearish week there is a fairly high chance of a correction. But even if it does take place, the rally is unlikely to drag on for long, considering there are tough resistances at 0.8813/12 (weekly and monthly PP) and 0.8842/38 (20 and 55-day SMAs). The outlook will remain bearish until USD/CHF confirms presence of a formidable support at 0.8631, where the pair should meet the 12-month trend-line and jump.

• Traders’ Sentiment

  More than three out of four traders (76%) expect the U.S. Dollar to increase in value relative to the Swiss Franc. The positive outlook is also provided by the orders placed 100 pips up and down from the spot—76% of them are to purchase the greenback.