EUR/USD spikes to monthly R1 after soft Fed

Technical Analysis

EUR/USD spikes to monthly R1 after soft Fed

“The market’s reaction of selling dollars actually serves the Fed well as it creates favorable conditions for a country raising rates while capping its currency’s strength.”

- Sumitomo Mutsui Trust Bank (based on Bloomberg)

• Pair’s Outlook

  The Federal Reserve turned somewhat bearish on monetary policy yesterday, therefore leading to weaker Greenback and uplifted EUR/USD cross. The rally exceeded 100 pips and was stopped by the first monthly resistance, as it had been expected. We are not ruling out a setback on Thursday and a correction to the downside, while even the daily RSI indicator assumes the pair became overbought on the basis of 24 hours. However, in case the bulls manage to push EUR/USD beyond 1.1227 and close there, then next bullish goals will be two major downtrends around 1.1330.

• Traders’ Sentiment

  Only one percent was lost on the bullish side of open positions, down to 41% from 42%. Alongside, pending orders continue to support a rally of the Euro in 54-51% of cases depending on the range from the spot.

GBP/USD muted ahead of BoE decision

“The magnitude of the dollar's reaction signals that investors were waiting for a reason to sell dollars.”

- BK Asset Management (based on Business Recorder)

• Pair’s Outlook

  The British Pound managed to recover from its intraday low yesterday, amid a dovish Fed statement. As a result, the monthly PP was once again confirmed as a strong support, as it pushed the Cable to close 40 pips under the 1.43 target. Technical indicators retain their bullish signals today, suggesting that another rally is likely to take place, this time pushing the GBP/USD currency pair above 1.43. The weekly PP and the 55-day SMA form a rather strong resistance cluster around 1.4320, which could provide sufficient supply to limit the gains. In case bears prevail, the monthly PP at 1.4141 is still the bottom floor.

• Traders’ Sentiment

  Although not as strong as yesterday, but SWFX market sentiment remains bullish at 60% (previously 65%). The share of purchase orders edged 11% points lower, they now take up 45% of the market.

USD/JPY poised for more weakness

“The Fed struck a very dovish tone, marking down its projected rate increase trajectory, while noting overall resilience in the U.S. economy and the absence of inflation pressures, this should be encouraging for risk sentiment and risk assets.”

- DriveWealth LLC (based on Reuters)

• Pair’s Outlook

  The Fed’s dovish statement weakened the US currency on Wednesday, allowing the Yen to push the pair beyond the triangle pattern’s support line. More bearish momentum is now expected to follow, but with the closest support located at 111.90, represented by the lower Bollinger band. Meanwhile, technical studies in the longer timeframes keep giving bearish signals, bolstering the probability of the negative outcome. Furthermore, the immediate resistance in face of the weekly S1 just above the opening price is weighing on the USD/JPY pair, but the exchange rate could still remain above 112.00, as this major level kept the US Dollar afloat for six weeks now.

• Traders’ Sentiment

  The Greenback is somewhat overbought, as 74% of traders still hold long positions. The portion of buy orders increased from 44 to 64%.

Gold rallies beyond 1,260 amid Fed decisions

“The market jumped after the Fed meeting but there are a lot of people on the long side, so some sort of profit-taking is happening today.”

- Lee Cheong Gold Dealers (based on CNBC)

• Pair’s Outlook

  The bullion commenced a reliable recovery on Wednesday, owing to softer than expected rate projections from the Fed. Backed by the January uptrend line, gold soared through the weekly PP and touched the February high at 1,263. Medium-term risks, however, are skewed to the South, particularly because the metal is fluctuating inside the rising wedge pattern. To erode these concerns, XAU/USD is has to violate the six-month resistance located around 1,287. At the same time, on the basis of next 24 hours gold can become a subject to a bearish correction, even though this scenario is still disagreed by daily technical indicators.

• Traders’ Sentiment

  The number of SWFX long open positions dipped down to 38% by Thursday morning from 45% a day ago. This is the worst share of the bulls in 12 working days.

•  Download Full Daily Forex Technical Overview

  Don't miss our new daily forecasts for EUR USD, GBP USD, USD CAD and USD JPY!