EUR/USD nears weekly S1 at 1.0856

Technical Analysis

EUR/USD nears weekly S1 at 1.0856

“A lot of people thought that might be the end of the big dollar rally but, to me, this is still the early days. The divergence has not reached its peak yet and, because of that, I’m not sure the dollar has either.”

- Brown Brothers Harriman & Co. (based on Bloomberg)

• Pair’s Outlook

  On Tuesday, the single European currency remained under significant bearish pressure, as US fundamentals pushed EUR/USD below 1.09. The pair dropped to one-month lows and was stopped by the weekly S1 at 1.0856, the lowest level since April 28. The focus remains on the downside, while the medium-term target is currently placed at 1.0774 (Bollinger band/Apr 24 low), with the possibility to drop as low at 1.0740 (monthly S1).

• Traders’ Sentiment

  The gap between long and short positions narrowed to minimal, as bulls are currently keeping 49% of all opened positions. Meanwhile, the commands to buy the Euro against the US Dollar in 100-pip range from the spot recovered 5% from Tuesday to reach 45%.

GBP/USD extends the correction for the second week

“They [US New Home Sales] weren't extraordinary but good enough for a return to considering higher U.S. interest rates this year.”

- National Australia Bank (based on CNBC)

• Pair’s Outlook

  Yesterday, the Sterling declined slightly more than anticipated, as the Cable crossed the immediate support at 1.5406, before stabilising at 1.5390. Moreover, the pair even reached a two-week low of 1.5350. Although the weekly S1 limited the losses, the support is likely to be breached today, with the second closest support located at 1.5260. Meanwhile, technical indicators keep giving mixed signals, unable to confirm the bearish scenario, as the Pound is edging higher during the morning hours.

• Traders’ Sentiment

  Market sentiment weakened, as only 44% of traders hold long positions (previously 48%). The share of purchase orders dropped down by four percentage points 53%.

USD/JPY struggles to overcome 123 area

“With U.S. interest yields looking to move up, that has been supportive of the dollar against the yen.”

- Action Economics (based on Reuters)

• Pair’s Outlook

  On Tuesday, the US Dollar skyrocketed and crossed the two closest resistance clusters. During the trading session the Greenback managed to reach the 2007 high, but was pushed back and, eventually, closed trade at the 123 psychological level. Technical indicators are showing bullish signs, suggesting the USD/JPY will surge again. However, a strong resistance cluster lies on the way around 123.10, which might force the pair to bounce back, as the Buck already failed to pierce the 2007 high again today.

• Traders’ Sentiment

  Long positions lost one more percentage point, now taking up 56% of the market. The number of buy orders also decreased, from 71 to 62%.

XAU/USD pierces through monthly PP

“I think the Fed would raise rates at least once this year and it's likely in September.”

- Phillip Futures (based on CNBC)

• Pair’s Outlook

  After four consecutive days of sluggish changes, the precious metal slipped considerably on Tuesday, while pricing US fundamentals. The nearest support, represented by monthly PP, weekly S1 and 55-day SMA failed to help the bullion to reverse losses or limit them. Therefore, XAU/USD slumped as low as 1,187 by the end of the trading. The bullion is now required to return back above 1,194 in order to preserve any possibility of a rebound. Otherwise, the cross will come under major negative pressure, and bears will eventually target the April low at 1,169.

• Traders’ Sentiment

  Advantage of bulls over bears at the SWFX market improved noticeable from yesterday, as the gap between them widened even more during the past 24 hours. The total share of bulls currently stays at 61% versus 39% for bears.