EUR/USD forms descending triangle

Technical Analysis

EUR/USD forms descending triangle

“It’s hard to see Yellen taking a hawkish tone in Jackson Hole.”

- Ueda Harlow (based on Bloomberg)

• Pair’s Outlook

  For the past three weeks EUR/USD has been forming a descending triangle, meaning the bears are slowly but surely gaining the upper hand over the bulls. This is also evidenced by the daily and weekly indicators. Accordingly, the currency pair is expected to breach the support at 1.3350, this will pave the way towards one of 2013 lows at 1.33. If the latter demand level is broken as well, the Euro will have a good opportunity to meet 2013 September low—1.31.

• Traders’ Sentiment

  The sentiment towards EUR/USD in the SWFX market stays neutral—52% of open positions are long and the remaining 48% are short. But the distribution between the buy and sell orders is slightly skewed in favour of the latter that take up 56% of the total.

GBP/USD attacks 200-day SMA

“Investors have been scurrying to push back their forecasts of when the BoE may first start to hike rate amid accusations that Carney had misled them in previous speeches.”

- Rabobank (based on MarketWatch)

• Pair’s Outlook

  GBP/USD refused to extend the decline and thus opened this week with a large upside gap. However, in order to negate at least some of the downward pressure the price will have to climb over the resistance at 1.6768/39. It will be a difficult task right now, considering that this supply area is created by the 200-day SMA and monthly S1. On the other hand, one of the key supports, namely the May low at 1.67, is still intact.

• Traders’ Sentiment

  The ratio between the bulls and bears is 60 to 40, meaning a majority of traders believes the Sterling is going to outperform the Buck. But at the same time, there is no significant difference between the buy (55%) and sell (45%) orders.

USD/JPY retreats

“Risk has evaporated from the markets after the Ukraine headlines. We have seen investors use the yen and Swiss franc as safe harbors.”

- Commonwealth Foreign Exchange (based on Reuters)

• Pair’s Outlook

  A rally above the 200-day SMA once again proved to be unsustainable, as a large portion of the gains were offset by the Friday’s dip. However, the overall bias is to the upside, being that most of the technical indicators are still pointing North, especially on the monthly chart. The current target is the July high at 103, and the outlook will remain bullish as long as the long-term up-trend support line at 102 is beneath the spot.

• Traders’ Sentiment

  Despite U.S. Dollar’s failure to show robust recovery, 72% of open positions are currently long on the currency. Moreover, 64% of pending orders placed 100 pips from the spot are to acquire the Greenback against the Japanese Yen.

USD/CHF falls to monthly pivot point

“Historically, trading leading into Jackson Hole sees increased volatility.”

- IG (based on CNBC)

• Pair’s Outlook

  USD/CHF is getting closer to the major rising trend-line at 0.90, which is supposed to nullify the downward momentum and instead initiate a bullish wave. If this is the case, the currency pair will have a good chance to surpass its August highs and finally revisit this year’s peak at 0.9156. Conversely, if the bears keep pushing the rate lower, there are also the 100 and 200-day SMAs able to stop the decline and send the price higher.

• Traders’ Sentiment

  There are relatively more bullish traders in the market than last week—their share increased from 71 to 74%. In the meantime, most of the orders, specifically 68% of them, are set to purchase the Dollar.