EUR/USD drops 300 pips as ECB launches QE

Technical Analysis

EUR/USD drops 300 pips as ECB launches QE

“One thing is clear, the ECB's decision shouldn't take the politicians off the hook, they should still do what's necessary.”

- Dutch Finance Minister (based on CNBC)

• Pair’s Outlook

  EUR/USD pair plummeted on Thursday, as the ECB unveiled a plan to buy 60 billion of securities monthly until September 2016, including government bonds. The cross dropped around 300 pips, from 1.1610 down to 1.1340 on Friday's morning. As a result, it has crossed two major support areas at 1.1460 and 1.1390. Therefore, the mid-term outlook for single currency will remain strongly bearish and a rebound is highly unlikely in the near term.

• Traders’ Sentiment

  On Friday's morning long and short positions on EUR/USD cross are staying at a completely equal level of 50% for both. Meanwhile, pending orders have turned to be slightly positive this morning as the share of longs increased from 33% to 51%.

GBP/USD makes another step towards the 2013 low

“The pound is still performing very well on a trade-weighted basis and pound-dollar is no longer being dragged lower by the relentless fall of euro-dollar.”

- Nomura International Plc (based on Bloomberg)

• Pair’s Outlook

  The Euro keeps dragging the Sterling lower, which has fallen through the weekly S1 and to the S2 level. Now there is a good chance for a bullish correction, though it is likely to be capped at 1.5050. Next week the Cable is expected to resume the sell-off, with the medium-term target at 1.48, but the support at 1.4900/1.4850 may delay the arrival of the pair at the 2013 low. The technical indicators are largely mixed at the moment.

• Traders’ Sentiment

  The ratio between the bulls (57%) and bears (43%) stayed the same, despite a precipitous decline. On the other hand, the percentage of traders planning to sell the British Pound substantially increased, namely from 56 to 81%.

USD/JPY rebounds from 118

“The risk grows that the Fed's discussion will go from raising rates to growing its balance sheet. They are not going to commit to a rate hike.”

- BMO Capital Markets (based on Reuters)

• Pair’s Outlook

  As expected, USD/JPY confirmed the support at 118. However, the bullish momentum is still fragile, being that the resistance at 119, mainly represented by the monthly pivot point, remains intact. If this supply level is not breached in the nearest future, the price may well return back to 116, where the monthly S1 together with the 38.2% Fibo will once again try to save the positive outlook for the US Dollar.

• Traders’ Sentiment

  At the moment there are considerably more people in the SWFX market believing the buck is going to outperform the Yen, as 64% of open positions are long. The buy orders are in a majority as well, taking up 61% of the total number of pending commands.

XAU/USD is back above 61.8% Fibo

“Despite gold's historical positive correlation to the euro, the scope for further euro losses would provide a boost for bullion, in our view, based partially on gold's appeal as a perceived safe haven asset along with gold being a currency that you cannot print more of.”

- HSBC (based on CNBC)

• Pair’s Outlook

  XAU/USD cross was rather volatile during the trading session back on Thursday, as market reacted to stimulus announcements of the European Central Bank. Gold traded in the range between $1,280 and $1,307 yesterday, covering two important support and resistance areas inside. As a daily result, the bullion closed just below the weekly R1 at $1,301. This resistance line is actively strengthened by the 2011 low just six dollars from above, and they both are unlikely to give up in the foreseeable future. Therefore, on Friday we may observe a consolidation around $1,290.

• Traders’ Sentiment

  Advantage of bulls over bears to buy the precious metal continues to return back strongly above 60% after a short-term fall a couple of days ago as the share of long positions added four percentage points since Thursday to reach 66% today.