GBP/USD keeps struggling to remain above 1.42

Technical Analysis

EUR/USD indecisive ahead of ECB decision

“The ECB will probably leave itself room for more asset buying and deeper cuts into the negative to avoid giving the impression it’s done with the easing. Markets are likely to respond in straightforward fashion with euro selling.”

- Credit Agricole (based on Bloomberg)

• Pair’s Outlook

  The bears performed strongly until the beginning of US session on Wednesday when EUR/USD managed to erode losses and bounce back to 1.10. In the morning on Thursday we see another round of selling pressure, but movements remain quite hesitant. It is all about the ECB meeting today. In December EUR/USD had spiked on disappointment. Bearish outcome of the gathering may send the pair well down to 1.08, in move that is estimated by daily technical indicators. However, the bulls will try to catch the first monthly resistance at 1.1227 in case there is dissatisfaction with the ECB's policy.

• Traders’ Sentiment

  Difference between long and short open positions in the SWFX market has been fixed at two percentage points throughout the past 24 hours, while pending orders deepened further into the red territory.

GBP/USD keeps struggling to remain above 1.42

“Sterling is likely to be most vulnerable on concerns of capital flight risk needed to fund the deficit, although its recent weakness has gone some way to reflect these risks.”

- Heartwood Investment Management (based on PoundSterlingLive)

• Pair’s Outlook

  The British currency remained almost completely unchanged against the US Dollar on Wednesday in the wake of mixed fundamental data results. Although the Cable managed to stay above the 1.42 major level, technical studies suggest the pair could edge lower again today. The immediate support is represented by the 20-day SMA, the weekly and the monthly PPs, but the Sterling could still put the middle level of the cluster, namely the monthly PP at 1.4141, to the test. On the other hand, the psychological 1.42 mark might cause a rebound, as the GBP/USD was unable to close below that area since Monday.

• Traders’ Sentiment

  Today 60% of traders have a positive outlook towards the British Pound, compared to 56% on Wednesday. At the same time, the share of sell orders barely changed, as it declined from 61 to 59%.

USD/JPY rises on risk appetite

“In the backdrop of firmer risk sentiment, and a commodity sector-led rise in equity markets, the appeal of the ‘safe haven’ JPY waned. A broad range of trading between 111.00 and 115.00 appears to be establishing itself near-term, largely influenced by shifts in global risk appetite.”

- BNZ (based on WBP Online)

• Pair’s Outlook

  The Greenback overperformed on Wednesday, as somewhat faded risk aversion pushed the USD/JPY higher. The pair almost completely erased its Tuesday’s losses, but with the 20-day SMA and the weekly PP providing sufficient resistance to keep the Buck from edging higher. This area remains the immediate resistance cluster today as well, but if bulls manage to advance the US Dollar higher, gains are likely to be capped by the 114.00 major level, rather than the nearest resistance area. Technical studies are now bolstering the possibility of the positive outcome by giving bullish signals in the daily timeframe, compared to bearish ones yesterday.

• Traders’ Sentiment

  Bulls keep dominating the market with their high percentage (74%), while the portion of purchase orders doubled from 33 to 66%.

Gold falls on supportive central bank background

“We are not overly concerned about the pullback we saw in the past two days, as we think gold's uptrend remains intact as long as the metal closes above $1,246.”

- ScotiaMocatta (based on CNBC)

• Pair’s Outlook

  The Greenback is appreciating on the back of weaker other currencies, while actual and expected central banks' expansionary policies are raising downside risks for gold. Yesterday XAU/USD failed to close under the weekly pivot point of 1,251, but today a selloff is being extended through this level. Any dovish movement by the ECB is likely to send the metal to the 1,230/23 area where demand will be offered by the February uptrend, 20-day SMA and weekly S1. However, December's frustration should be kept in mind, meaning less decisive Mario Draghi will increase upside risks for the bullion with an aim at recent peaks of 1,279.

• Traders’ Sentiment

  Markets participants entered the wait-and-see mode before that crucial meeting of the ECB, as we have seen a freeze to distribution between the longs and shorts at 41-59% over the past 24 hours.

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