EUR/USD closes Wednesday session below 1.11

Technical Analysis

EUR/USD closes Wednesday session below 1.11

“The euro is in the phase where investors want to assess the real state of the economy, rather than speculating on it, as for the U.S.”

- Sumitomo Mitsui Banking Corp. (based on Bloomberg)

• Pair’s Outlook

  EUR/USD declined for a third consecutive day on Wednesday, even though losses were limited after FOMC minutes. At first, the US Dollar appreciated to reach the May 5 high at 1.1060, but pared gains later during the trading and the cross closed just below 1.11. At the same time, bears are now targeting the monthly PP at 1.10, a close below which will negate the short-term bullish outlook and refocus attention to the downside.

• Traders’ Sentiment

  The gap between long and short positions remains biased in favour of the latter, as bulls are currently keeping only 47% of all opened positions. Meanwhile, the commands to buy the Euro against the US Dollar in 100-pip range from the spot plunged to 42%.

GBP/USD maintains channel pattern

“Although they contained no outright surprises, the April FOMC minutes showed a few signs of participants growing more concerned about downside risks to the economic outlook, with little mention of offsetting upside risks.”

- JPMorgan (based on CNBC)

• Pair’s Outlook

  The powerful support cluster around 1.55 managed to turn the tide for the Cable. Although the Sterling did rebound, the surge was only 30 pips long. The channel pattern remains intact, as the Cable is expected to extend its rally today. The weekly PP retains its role as the immediate resistance level, while technical indicators are giving bullish signals, bolstering the positive outcome. However, we should not rule out the possibility of a slump back to the support cluster if the US fundamentals outweigh the ones in the UK.

• Traders’ Sentiment

  Market sentiment weakened, as only 45% of traders are now long the Pound. The share of buy commands, on the other hand, increased from 53 to 56%.

USD/JPY: March high so close, yet so far

“Lower expectations for a BOJ easing and smaller JPY short positions suggest limited downside risk for USD/JPY, and we still feel comfortable with maintaining USD/JPY long positions. We maintain our end-June USD/JPY target at 123, recommending keeping a JPY short bias.”

- Nomura (based on FX Street)

• Pair’s Outlook

  For a third consecutive day the Greenback pressured the Japanese Yen yesterday. The two closest resistance were pierced, as well as the 121 psychological level. Moreover, the USD/JPY currency pair even reached the third resistance level (weekly R3) at 121.51, which is not far from the March ceiling. Today the weekly R3 acts as an immediate resistance, but is likely to be breached, unless the US fundamentals disappoint. Once the US Dollar takes the December high, we might see it test the March pinnacle at 122.03.

• Traders’ Sentiment

  Bulls keep losing ground, as today 58% of all positions are long (previously 60%). The number of orders to buy the Buck declined by ten percentage points, as they now take up 65% of the market.

XAU/USD hovers below supply at 1,210

“To be sure, the minutes are a bit stale given that the meeting took place before the April employment and retail sales reports. In this respect, Fed Chair Yellen's Friday speech on the US economic outlook may be a better gauge of how the Fed views the latest data.”

- Deutsche Bank (based on WBP Online)

• Pair’s Outlook

  On Wednesday, the yellow metal attempted to trade further down after major losses a day before. However, the bullion was stopped by immediate support at 1,203, which is represented by the 20-day SMA. This line reversed Gold back towards the weekly PP at 1,209. A confident confirmation below 1,194 (monthly PP) is needed in order to confirm the medium-term bearish expectations. On the other hand, an advance back above the cluster of resistances around 1,215 should energise bulls for additional purchases of the precious metal.

• Traders’ Sentiment

  Advantage of bulls over bears at the SWFX market decreased significantly this week, while the gap between them amounts to just two percentage points at the moment. The total share of bulls stays at 51% versus 49% for bears.