GBP/USD gains bearish momentum

Technical Analysis

EUR/USD

EUR/USD approaches 1.2964/63

“The headlines from Europe are probably going to get worse over the course of the next three to four months”

- Rochford Capital (based on Bloomberg)

• Pair’s Outlook

  EUR/USD halted last week’s advancement ahead of 1.3122/51 and is currently pulling back to the 20-day SMA at 1.2964/63. In case it does not manage to preserve bullish outlook, subsequent support is located at 1.2856/26 and is reinforced by 1.2803/1.2787. Accordingly, the pair is expected to recommence rally and then aim for 1.3122/51.

• Traders’ Sentiment

  While the U.S. Dollar is the most frequently (in 62% of cases) acquired currency among its major counterparts, sentiment of traders is moderately bearish towards EUR/USD, as 44% of positions are long and 56% are short. The ratio between buy and sell orders is 51% to 49%, respectively.

GBP/USD

GBP/USD gains bearish momentum

“We continue to expect the MPC to loosen policy at its November meeting, with a 50 billion pound extension of asset purchases and, more speculatively, a 25 basis point cut in Bank Rate”

- Barclays (based on Reuters)

• Pair’s Outlook

  After breaching 1.6139 the cable is likely to challenge 1.6085/62, penetration of which in turn will pave the way towards 1.5988/56. Rallies in the meantime are to be contained by 1.6139 in conjunction with a formidable area at 1.6184/1.6212, largely formed by a major downtrend resistance line. In the long term we still favour bearish scenario and eventual attainment of 1.5601/1.5575.

• Traders’ Sentiment

  Judging by SWFX traders’ sentiment on GBP/USD, the pair is strongly oversold, since 72% of positions are currently short, whereas the share of long ones is merely 28%. At the same time distribution between orders placed does not give a distinct signal, being 53% to 47%, accordingly.

USD/JPY

USD/JPY pulls back from 78.74

“Investors are wary of buying the yen on concerns that the Japanese authorities could intervene to weaken it”

- CNBC

• Pair’s Outlook

  USD/JPY is presently headed towards an initial support level at 78.45/44, but may decline even more in the short term, down to 78.23/77.99. Further extension of a dip should be limited by 77.51/37 and 76.99/95, there the price is anticipated to start a long recovery, although it will have to confirm its bullish intentions by overcoming 79.53/79.

• Traders’ Sentiment

  On average, in about 26% of trades involving JPY crosses, the Japanese Yen is sold against its peers, making it one of the least popular currencies in the SWFX marketplace. The share of bullish market participants is 72%, while the portion of bearish traders is only 28%.

USD/CHF

USD/CHF to test 0.9338/40

“After the initial knee-jerk rally in risk in response to the decline in the U.S. unemployment rate on Friday, risk assets gave up their gains and sold off into the North American close, extending into Asian trading to start the week”

- RBC Capital Markets (based on MarketWatch)

• Pair’s Outlook

  Being that downward impetus has already waned, USD/CHF is slowly returning back to a downtrend resistance line at 0.9338/40, from where we might see another bearish leg to appear. Conversely, violation of 0.9338/40 would allow the price to rise up to 0.9406/26 and thus form a double bottom pattern, implying emergence of a reversal.

• Traders’ Sentiment

  An overwhelming majority of traders exposed to USD/CHF are holding long positions (70%), while merely 30% of the market expects the Swiss Franc to gain value. As for the orders, 54% of them are to buy the greenback and 46% are to sell it, thereby giving mixed signals.