USD/JPY makes efforts to extend gains

Technical Analysis

EUR/USD in wait-and-see mode before Fed

“The fall in oil prices, the fall in equity prices, the rise in the euro, the developments in the broader commodities complex -- all of these are driving inflation significantly lower. It is to that that Mario Draghi is responding.”

- Goldman Sachs (based on Bloomberg)

• Pair’s Outlook

  The pair fluctuated within the range between two moving averages on Tuesday, namely 20 and 55-day SMAs at 1.0869 and 1.0829, respectively. Tranquil trading is explained by expectations of the Fed meeting, and this fact is confirmed by falling trading volume. Dovish statement later on Wednesday will make the Euro quite buoyant today, with the short-term target being unchanged near 1.0960/80 (Bollinger band; 100-day SMA). Meantime, support will continue to be offered by a dense demand area above 1.08. Any break out below here should trigger a selloff down to 1.0715 (January lows).

• Traders’ Sentiment

  SWFX bears remain in the majority of 54% for open positions. Alongside, 59% of all pending orders in 100-pip range from the spot suggest the EUR/USD pair will decline in the foreseeable future.

GBP/USD muted ahead of Fed

“If the Fed sounds too dovish a chord, they'll lose the option to raise rates in March. If the Fed isn't so dovish, it's likely US yields will rise, and the dollar will strengthen.”

- Sumitomo Mitsui Banking (based on Business Recorder)

• Pair’s Outlook

  The British currency was able to recover from daily losses and end the day with a rally, with a six-week down-trend getting breached. Nevertheless, the immediate resistance was not reached, demand around which, around 1.4415, remains strong. Meanwhile, the closest support is still represented by the weekly PP, but the exchange rate is expected to drop lower if the Fed’s statement turns out to be hawkish today. Technical indicators also suggest a decline is due, but the Cable has the potential to touch the 1.45 level.

• Traders’ Sentiment

  Bull lost some numbers today, as 61% of all open positions are long, compared to 65% of Tuesday. At the same time, the portion of purchase orders lost eight percentage points, falling to 58%.

USD/JPY makes efforts to extend gains

“As investors remain focused more on the BOJ meeting this time, we would see the dollar-yen pair to show only a limited reaction (to the Fed statement).”

- Barclays (based on Market Watch)

• Pair’s Outlook

  The USD/JPY managed to erase daily losses on Tuesday, as a strong reading of the US CB Consumer Confidence boosted the American currency. Even though the pair closed with a 12-pip surge, a relatively tough group of levels is supporting the Buck from below. The 20-day SMA, the weekly PP and the monthly S1 form a cluster around 117.90, whereas the monthly S1 at 118.93 remains the nearest resistance. Technical indicators also changed direction from south-ish to mixed, suggesting a decline is unlikely. Nonetheless, the FOMC statement’s tone could cause a breakout of either barrier.

• Traders’ Sentiment

  There are now 72% of traders being short the Greenback (previously 71%). The share of orders to buy the USD slid from 61 to 58%.

Gold surges further as 200-day SMA is looming

“The world's economic condition doesn't seem to give the Fed reason to hike rates soon given the growth risks.”

- OCBC Bank (based on CNBC)

• Pair’s Outlook

  Gold will likely manage to consolidate above 1,107 on Wednesday, in case it preserves gains of the previous trading session. On Tuesday the precious metal climbed to 1,120 and the next major resistance zone is fairly reachable over the next 24 hours. The Fed should provide a dovish statement to weaken the Dollar and raise demand for the safe haven. We are watching the 200-day SMA at 1,130 and this level is reinforced by a third monthly resistance at 1,127. Success here will imply a major shift of market sentiment, while new focus will be on the 2015 downtrend line at 1,150.

• Traders’ Sentiment

  54% of all SWFX market participants are holding long positions on gold in the morning on Wednesday, down from 55% seen 24 hours ago. Market sentiment has changed for the first time since last Thursday.

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