GBP/USD attempts to recover from Monday's losses

Technical Analysis

EUR/USD is determined to breach 200-day SMA

“After the re-calibration of our instruments put in place this month by the Governing Council, we expect inflation will reach our objective without undue delay.”

- Mario Draghi, ECB President (based on Bloomberg)

• Pair’s Outlook

  EUR/USD's volatility surged on Monday, despite lack of fundamental news and in anticipation of the looming Fed interest rate decision. The pair was testing the 50% Fibonacci retracement of an Oct-Nov downtrend at 1.1008 during the Asian session. However, the bulls are mainly ignoring this resistance, in order to focus more on the 200-day SMA at 1.1033. This moving average is guarded by the 100-day SMA from the north with a 26-pip gap. Considering difficulties to consolidate above both of them earlier last week, we are skeptical about the pair's ability to do that in the next 24 hours as well.

• Traders’ Sentiment

  SWFX market remains 55% bearish on the Euro. At the same time, 50 and 100-pip pending orders changed hands yesterday. The former are now 54% long, while the latter are similarly short on EUR.

GBP/USD attempts to recover from Monday’s losses

“Dollar long positions are being liquidated in the market at a faster pace than expected. It could face additional pressure if U.S. Treasuries are bought back on relief that the Fed's rate hike cycle will be quite a slow one.”

- IG Securities (based on Reuters)

• Pair’s Outlook

  The British currency experienced a rather sharp sell-off on Monday, amid remarks of the BoE official concerning poor nominal wage growth. Higher losses were prevented by the second support cluster around 1.5130, also keeping the pair afloat today during the Asian session. In case the weekly PP and 20-day SMA fail to support the GBP/USD, a slump towards the 1.5038 level, namely the weekly S1, could occur. On the Other hand, a retest of the down-trend at 1.5274 is possible if 55-day SMA resistance gives in and the fundamentals are in the Sterling’s favour.

• Traders’ Sentiment

  Bears keep outnumbering the bulls, as 56% of all positions are short. The portion of buy orders, however, remained unchanged at 51%.

USD/JPY on the verge of falling to Nov low

“I think the FOMC will likely provide extremely cautious outlook. Looking at the U.S. economy, the situation doesn’t enable (the Fed) to keep knocking up rates.”

- Yukio Ishizuki, Daiwa Securities (based on Market Watch)

• Pair’s Outlook

  The US Dollar dropped to a fresh five-week low yesterday, but managed to partially recover from that slump, closing trade above the immediate support. Even though the monthly R1 is now bolstered by the Bollinger band, technical studies insist the USD/JPY is to edge even lower. Losses are unlikely to extend beyond the November low of 120.25. Meanwhile, a strong cluster, represented by the weekly PP, 55, 100 and 200-day SMAs, is to limit any volatility to the upside.

• Traders’ Sentiment

  The gap between long and short positions keeps narrowing, as 56% of traders are short the USD today (previously 59%). Meanwhile, there are more orders to purchase the US currency, namely 56%.

Gold closes below 1,060 to push outlook down

“We are looking more at the 2016 panorama, in which the Fed continues to tighten and the U.S. economy delivers reasonably well. That does not argue for a higher gold price. Gold will be a casualty.”

- Societe Generale (based on Bloomberg)

• Pair’s Outlook

  The bearish scenario was fully implemented on Monday, as gold prices came under a substantial pressure created by short traders. After crossing both weekly S1 and lower Bollinger band around 1,062 the bullion settled at 1,060 by day-end. A recovery is not being ruled out on Tuesday, but the overall outlook has deteriorated since yesterday. The bears are now setting eye on a more medium-term target, namely the 2010 low at 1,044. However, markets remain cautious ahead of the Fed decision, which may surprise on the dovish side and eventually send gold upwards.

• Traders’ Sentiment

  SWFX traders decided to increase the total number of short market positions. At the moment the bears are accounting for 41% of the whole market, while the bulls are down to 59% (62% yesterday). This is the most bearish-biased distribution in five weeks.

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