EUR/USD preserves bearish momentum

Technical Analysis

EUR/USD preserves bearish momentum

“Without any new policy actions to hide behind, the ECB could find itself with some tricky questions to answer, which ultimately could weigh on the EUR.”

- Forex.com (based on MarketWatch)

• Pair’s Outlook

  As it turned out last week, the 2013 low was unable to prevent the Euro from further depreciation. As a result, EUR/USD is now testing the support at 1.2650, represented by the 2012 Q4 low. If there is a rebound from here, it is likely to be stopped by 1.2750, where the last year’s main trough coincides with a two-month down-trend. But regardless of the near-term fluctuations, the 2012 low at 1.2050 will be considered the primary target in the long run.

• Traders’ Sentiment

  Just as last week, most of the SWFX market participants are bullish with respect to EUR/USD, namely 62% of them. As for the orders issued, 35% of them are to buy and 65% are to sell the European currency against the Buck.

GBP/USD is headed towards 1.6050

“While UK growth indicators have moderated, overall the picture for sterling against the crosses remains robust.”

- Morgan Stanley (based on Reuters)

• Pair’s Outlook

  GBP/USD has recently confirmed the falling resistance line, meaning the current sell-off is in a good position to extend down to 1.6050. In case there are rallies in the process, they should be limited by the down-trend and 23.6% Fibo retracement (of Jul-Sep decline). And if the Cable closes beneath the yearly low, the 2013 Q4 low at 1.5850 is bound to become the next objective, even though the monthly indicators are against such a scenario.

• Traders’ Sentiment

  Over the weekend there was only a marginal shift in the percentage of long positions open—from 57 to 59%. In the meantime, the portion of orders to sell the Great British Pound soared from 64 up to 81%.

USD/JPY closes above 109

“With Treasuries threatening to resume their bearish trend, [the dollar/yen cross] looks set to resume its larger bull trend. A break of 109.36 confirms a resumption of the larger bull trend, targeting 110.67, ahead of 112.42.”

- Bank of America Merrill Lynch (based on MarketWatch)

• Pair’s Outlook

  Although at first USD/JPY was hesitant to continue advancement around 109, being well-supported at 108.50 allowed the currency pair to gather strength and overcome this obstacle. Now the U.S. Dollar is aiming for 110.70, namely the 2008 high, but it will have to breach the weekly R1 and R2 levels at 109.87 and 110.34 respectively first. The bullish behaviour is also implied by the indicators on daily, weekly and monthly time-frames.

• Traders’ Sentiment

  The SWFX traders remain sceptical regarding the Greenback’s ability to carry on outperforming the Japanese Yen in the future, as shown by an elevated share of short positions open in the market—67% of the total amount.

USD/CHF targets 0.9750

“It’s the ongoing story of the greater likelihood that the Fed will move before anybody else.”

- Interactive Brokers (based on Bloomberg)

• Pair’s Outlook

  The Greenback keeps strengthening and there seem to be no resistances in USD/CHF nearby that could contain the present upward momentum. The closest dense supply area is expected to be encountered only at 0.9750, where the weekly R3 level merges with the 2013 Q3 high, just 100 pips away from the 2013 high. But even if the price slips before reaching these highs, the bullish outlook should be preserved by the dense demand zone at 0.94.

• Traders’ Sentiment

  The difference between the numbers of bulls and bears is still insignificant—10 percentage points. But there has been a large change in the distribution between the buy and sell orders—the former now take up 65% of the market (59% last Friday).