GBP/USD in tight range between 1.38 and 1.40

Technical Analysis

EUR/USD confirms uptrend to the downside

“EUR/USD grinding steadily lower is a function of inflation as well as Brexit, with both likely to keep pressure on the currency”.

- Jefferies Group LLC (based on Bloomberg)

• Pair’s Outlook

  Pessimistic inflation statistics from the Euro zone used to have a direct negative impact on the Euro on Monday, even though the currency attempted to remain above 1.0930 in the first part of the day. Eventually, it closed at 1.0872 and kept the weekly S1 intact. The two-month uptrend line is now violated and we are awaiting consolidation today. Bullish hopes are being limited by both 55/100-day SMAs at 1.0935/67. In the meantime, a drop of EUR/USD under the first weekly support is expected to cause another round of a sell-off down to the February low of 1.0809 over the next 24 hours.

• Traders’ Sentiment

  The percentage of long positions in the SWFX market grew to 53% by Tuesday morning, the highest level in almost 14 weeks. Pending orders, however, continue betting on Euro’s decline in 52-55% of all cases.

GBP/USD in tight range between 1.38 and 1.40

“Brexit risk has become more two-sided coin because of the size of the Brexit risk discount in the GBP, now that the discount is there, positioning and short-term valuation in GBPUSD indicate the strong possibility of a short squeeze”.

- BMO Capital Markets (based on PoundSterlingLive)

• Pair’s Outlook

  The British Pound succeeded in outperforming the US currency at the beginning of the week, thus, retaking the 1.39 major level. Today the Cable remains caged between the weekly PP at 1.4012 and the cluster around 1.3750, represented by the Bollinger band and the weekly S1. However, technical studies retain their bearish signals, suggesting that the pair could erase some of yesterday’s gains. Nevertheless, there is still room for more than a 90-pip rally towards the nearest resistance, in case the Buck loses significantly more long positions later.

• Traders’ Sentiment

  The percentage of Sterling long positions open in the SWFX market keeps oscillating between 63% and 65%, with the lowest of the two prevailing today. At the same time, the share of buy orders barely changed—increased from 58 to 59%.

USD/JPY attempts to regain the bullish momentum

“As expected, the G20 meeting did not result in big changes and it's now easier to buy the yen. There were no strong policy statements - they merely reiterated that competitive currency devaluations were not a good thing - and the yen appeared a good bargain after last week's slide”.

- BBH (based on Reuters)

• Pair’s Outlook

  As was anticipated, the USD/JPY currency pair weakened on Monday and pierced the immediate support area; however, the second target at 112.00 was not reached. Even though demand for the safe haven Yen remained strong earlier today and pushed the pair closer to the now immediate resistance—the weekly S1 at 112.01. Investors appear to have regained some confidence in the Buck, helping the pair recover from intraday losses on the moment of writing, but the resistance at 113.00, namely the weekly PP, if not to contain the volatility, then could keep the Greenback from appreciating. In case of a breach, the pair could potentially even reach the second resistance around 114.00.

• Traders’ Sentiment

  Today 72% of all open positions are now long, compared to 70% on Monday. Meanwhile, the number of buy orders slid from 65 to 52%.

Gold picks up and eyes February highs

“Weak data globally is adding to concerns over a slowdown and that is helping gold”.

- a bullion trader in Hong Kong (based on CNBC)

• Pair’s Outlook

  Monday has been a green day for the bullion, which bounced off the February uptrend and spiked towards the 1,240 mark. Tuesday sees a continuation of the bullish tendency, which is estimated to lead to a testing of the first weekly resistance at 1,249. This one is guarding the February 24 high at 1,253 and the multi-month high at 1,263. Growth beyond the latter is unlikely throughout the next 24 hours, unless there is any heavy shock from external economic factors. However, daily technical indicators do not abandon their optimistic stance, meaning general sentiment prefers a rally to a bearish correction.

• Traders’ Sentiment

  Market participants that are betting on gold’s rally began returning to the marketplace and pushed their respective share of total open positions to 31% from 27% yesterday. For the first time in five days less than 70% of all SWFX traders are short on the bullion.

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