EUR/USD approaches 1.37

Technical Analysis

EUR/USD approaches 1.37

“What the ECB has truly achieved is a break in the correlation between a rising euro and rising euro stocks.By doing so, they’ve actually supported euro stocks because the exchange rate becomes less of a concern.”

- Societe Generale (based on Bloomberg)

• Pair’s Outlook

  EUR/USD has gotten even closer to a cluster of resistances at 1.3700/1.3669. After testing this supply area the currency pair is expected to decline and then probe one of the key supports at 1.35, which consists of the monthly S1 and 2013 low. And even though the monthly technical indicators are bullish, the major resistances are still intact, suggesting the risks are heavily skewed to the downside in the longer-term perspective.

• Traders’ Sentiment

  As the Euro appreciated, the sentiment towards the currency worsened, since now more traders see it as overvalued, namely 59% of them. In the meantime, there is no significant difference between the buy (49%) and sell (51%) orders.

GBP/USD stalls at 1.7044

“The $1.7065 recent peak is set to be tested, we believe, with a move above here opening potential to $1.7200 initially. We maintain our medium-term $1.7500 target.”

- Morgan Stanley (based on Reuters)

• Pair’s Outlook

  The bullish pressure does not allow the Cable to retreat. However, at the same time the currency pair is unable to push through the resistance at 1.7044—the 2009 high. If it does manage to cross this level, there will be a good opportunity for the price to reach 1.74. Alternatively, if the bulls finally give in, the Sterling will most likely try to find support at a dense demand zone around 1.68—up-trend line, monthly PP and 100-day SMA.

• Traders’ Sentiment

  A substantial majority of the SWFX market participants are holding short positions, specifically 71% of them. As for the orders, the difference between the amounts of buy and sell ones narrowed from 34 to 26 percentage points.

USD/JPY probes 101.20

“The geopolitical risks support yen buying. Dollar-yen is expected to trade lower should it fail to recover above the 200-day moving average”

- Ueda Harlow (based on Bloomberg)

• Pair’s Outlook

  USD/JPY decisively breached the up-trend support line and then moved rapidly towards 101.20 last week. For there to be a chance of a rally, this level should withstand the selling pressure, as it did earlier this year on several occasions. But while the monthly technical studies are pointing upwards, the daily and weekly indicators imply that the rate is going to fall further south before there is a recovery.

• Traders’ Sentiment

  Concentration of the bulls slightly diminished compared to the previous report (73%), but they are still taking up a substantial part of the market—70%. Meanwhile, the gap between the buy (69%) and sell (31%) orders widened.

USD/CHF breaks 55-day SMA

“Our bullish USD and higher U.S. rates views are built on a continuing economic recovery, tightening labour markets and a significant rise in inflation versus Fed forecasts that forces the market to re-price the medium-term path of the fed funds rate.”

- Barclays (based on CNBC)

• Pair’s Outlook

  The U.S. Dollar broke away from the 200-day SMA and closed below the 55-day SMA, meaning the current downward momentum is unlikely to subside any time soon. Still, there are significant supports nearby that could weaken the bears, such as the monthly PP at 0.8895/81 and 100-day SMA at 0.8870/67. Nevertheless, the monthly technical indicators are mostly giving ‘sell’ signals (four our of eight).

• Traders’ Sentiment

  More and more traders become convinced the U.S. Dollar is below its fair value, being that 72% of open positions are long (69% last Friday). Similarly, there is a notable advantage of buy orders (69%) over the sell ones (31%).