EUR/USD stabilises ahead of 200-day SMA

Technical Analysis

EUR/USD stabilises ahead of 200-day SMA

“Despite the stabilization in risk appetite, there is a reluctance to really start shorting bonds ahead of the ECB. There is somewhat of a discrepancy between equity markets and bond markets, and I would put that to a large extent on what’s happening with the ECB.”

- Jan Von Gerich, Nordea Bank AB (based on Bloomberg)

• Pair’s Outlook

  EUR/USD undergoes a downside correction within a bullish channel. Our bias is therefore bearish until the rate reaches the 1.0970/60 area, probably in a week’s time. There, the lower bound of the pattern is reinforced by numerous studies, including the monthly R1 and 100-day SMA. The nearest significant support is at 1.1050, represented by the 200-day SMA. In the meantime, the upside is relatively free from strong resistances up to the monthly R3.

• Traders’ Sentiment

  The SWFX market participants are undecided with respect to the Euro. At the moment, 48% of them are long and 52% are short. There is also no visible difference between the amounts of buy and sell orders—49 and 51%, respectively.

GBP/USD slumps on Brexit fears

“Political uncertainty generated by the UK referendum will weigh on GBP.”

- Commonwealth Bank (based on Reuters)

• Pair’s Outlook

  A lot better-than-anticipated UK Retail Sales figures on Friday helped the Cable to overcome the 1.44 mark. However, today the GBP/USD opened with a rather significant bearish gap, amid London’s mayor stating he would support the Brexit. Meanwhile, technical indicator signals shifted from bullish to mixed, implying that a negative outcome is more probable by day’s end. The weekly S1 at 1.4247 is providing immediate support, but is unlikely to hold the losses. As a result, we might see a large drop below the 1.42 major level if demand at the second target, namely the Bollinger band, is weak.

• Traders’ Sentiment

  Today 64% of traders are long the Pound, compared to 61% on Friday. The share of purchase orders, however, slid from 63 to 59%.

USD/JPY oscillates around 112.50

“During some past periods of yen strength, the Japanese Ministry of Finance (MoF) has directed the BoJ to conduct currency intervention to offset yen strength by buying large sums of U.S. dollars.”

- Wells Fargo (based on FXStreet)

• Pair’s Outlook

  Even despite higher inflation figures, the US Dollar was unable to edge higher against the Japanese Yen on Friday. Dollar bulls might push the pair higher today, but if not the weekly PP at 113.24, then the cluster around the 114 yen should stop the possible rally. Technical studies, on the other hand, suggest the USD/JPY is to suffer a third consecutive decline, with the nearest support located circa 111.70, namely the monthly S3 and the weekly S1. The Greenback was unable to stabilise that low for more than a year, and no event is expected to push the pair towards that area today.

• Traders’ Sentiment

  There are 72% of traders with a positive outlook towards the Buck, while the share of sell orders dropped from 69 to 60%.

Gold looks for support

“People are willing to take risk again.”

- Shaw and Partners (based on Bloomberg)

• Pair’s Outlook

  Although gold confirmed a breakout by bouncing off of the new support at 1,191.50, the bullion does not seem to be in a hurry to advance further north. However, it seems that the price is forming a symmetrical triangle, and at the same time there is a strong support level at 1,210, which should be able to trigger a new wave of buying. On the other hand, a deeper decline will imply formation of a descending triangle, meaning the downside risks will substantially increase.

• Traders’ Sentiment

  The share of short positions grows. While last week 68% of the SWFX traders were bears, today nearly three fourths of positions are to profit from gold’s depreciation.

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