Technical Analysis

EUR/USD risks correcting lower from 1.0930

EURUSD

“If volatility is sustained over a period of time, it’s likely to decrease the odds of further Fed rate hikes, at least at the pace that the market’s pricing in, and that’s obviously negative for the dollar.”

- Commonwealth Foreign Exchange Inc. (based on Bloomberg)

  • Pair’s Outlook

    EUR/USD created a classical long lower shadow candlestick during the session on Friday. It indicates that short traders controlled the pair, but then lost overall control to the bulls who managed to make an impressive comeback. Such a candle followed a strong surge on Thursday, meaning the up-trend seems to be diminishing. The Euro is at risk of tumbling from a December downtrend near 1.0930. The key bearish obstacle is placed above 1.08 (55-day SMA, monthly PP). The bullish success, however, can send the pair as high at 100-day SMA at 1.1024.

  • Traders’ Sentiment

    The bullish portion of SWFX open positions rose further from 44% to 45% by Monday morning, while 100-pip long pending orders returned back into red (53% bearish) over the weekend.

GBP/USD struggles to regain bullish momentum

GBPUSD

“Wage growth is falling... (and) the broad sterling trade-weighted index that the Bank tracks remains close to cycle highs even as GBP/USD heads lower. For these reasons, we remain comfortable with being short GBP/USD even if the BoE turns hawkish again.”

- Deutsche Bank (based on Reuters)

  • Pair’s Outlook

    On Friday the GBP/USD currency pair pierced the 2015 low, falling to a fresh six-year low, amid strong US NFP figures. From the technical point of view the Cable should undergo a corrective rally today, as the bearish momentum persisted for two weeks straight; however, risks of edging lower persist, with technical studies retaining mixed signals. The monthly S1 at 1.4567 is the nearest resistance, whereas the Bollinger band is providing support around 1.45. Nevertheless, due to a breach of the key support on Friday, the decline might now extend all the way down to the 2010 low at 1.4230.

  • Traders’ Sentiment

    Today 65% of traders hold long positions (previously 64%), while the number of purchase orders dropped from 69 to 44%.

USD/JPY attempts to change its course

USDJPY

“This [strong NFP reading] means that the Fed continues to be on track for rate increases.”

- ABN Amro Bank NV (based on Bloomberg)

  • Pair’s Outlook

    Despite a strong reading of the US Non-Farm Payrolls on Friday, the USD/JPY was unable to maintain trade in the green zone. The pair retreated from intraday gains and breached the key support, breaking the three-year up-trend, as the Yen’s safe haven status prevailed. The bearish trend appears to be intact, as the Greenback keeps struggling to outperform the Japanese currency. A failure to rebound is likely to lead the Buck towards the 2015 low of 115.85, as the immediate support lacks the strength to limit the losses. Meanwhile, the monthly S2 is to prevent the pair from climbing up.

  • Traders’ Sentiment

    Bearish market sentiment remains unchanged at 58%, whereas the portion of orders to acquire the USD edged higher from 43 to 58%.

Gold to be pressed down by 100-day SMA

Gold

“We have some supportive factors in the market such as Saudi Arabia-Iran tensions, devaluation of yuan which have prompted safe have appeal of gold.”

- Lee Cheong Gold Dealers Ltd (based on CNBC)

  • Pair’s Outlook

    Last Friday the precious metal formed a long lower shadow candlestick, meaning the bears failed to hold to daily gains. Initially they were managing to push prices down to 1,092 (Jan 7 open), but it eventually closed trading near Oct 2015 low at 1,104. We see 100-day SMA (1,108) as the main resistance for the bullion at the moment. Friday's inability to extend a rally after two consecutive days of growth is putting positive prospects at risk. The mid-term bearish target is 55-day SMA/monthly R1 at 1,084. The bulls, however, are hoping to overcome 100-day SMA and climb as high as the monthly R3 at 1,127.

  • Traders’ Sentiment

    Distribution between open positions in the SWFX market has been steady during the weekend, as the bulls and bears are holding 55% and 45% of them, respectively.

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This overview can be used only for informational purposes. Dukascopy SA is not responsible for any losses arising from any investment based on any recommendation, forecast or other information herein contained.

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