EUR/USD is inclined to extend decline

Technical Analysis

EUR/USD is inclined to extend decline

“We remain constructive on the USD and continue to run long USD/JPY and short EUR/USD recommendations.”

- Barclays (based on CNBC)

• Pair’s Outlook

  Despite the strong downward momentum the support at 1.3383/69 managed to withstand the attack of the bears yesterday. And while there is a possibility of a pull-back up to 1.35 (three-month down-trend), the overall outlook is likely to remain negative for quite some time. The monthly S3 should eventually give in, which in turn will expose 2013 Q4 low near 1.33. The next major level could be the 2013 September low around 1.31.

• Traders’ Sentiment

  The bulls have finally gained a small but nonetheless an advantage over the bears, as the former now take up 57% of the market. As for the orders, there are noticeably more commands to sell (62%) than to buy (38%) right now.

GBP/USD tries to find support at 1.69

“The [U.S.] data led markets to think that there's no need to be pessimistic about the U.S. economy.”

- SMBC Nikko Securities (based on Reuters)

• Pair’s Outlook

  There still seems to be a small chance for the Sterling to avoid further depreciation, as it is currently facing a number of strong supports. Apart from a long-term rising trend-line, there is the 100-day SMA that this year proved to be worth considering. Moreover, most of the technical indicators on the weekly and monthly time-frames are pointing North, suggesting the bulls could potentially regain control of the market and save the positive outlook.

• Traders’ Sentiment

  Substantial depreciation of the Pound during the last weeks has led to a balance between the bullish (49%) and bearish (51%) market participants. In the meantime, the share of buy orders 100 pips from the spot fell from 54% down to 43%.

USD/JPY soars to 103

“The signs are there that a stronger U.S. dollar trend is emerging. The combination of the upside surprise in GDP and a Fed that admits that the economy is looking healthier provides a useful source of fuel for the U.S. dollar near term.”

- Westpac Banking (based on Bloomberg)

• Pair’s Outlook

  Though the last few months there were serious doubts regarding USD/JPY’s ability to break this year’s down-trend, right now the currency pair is already trading 100 pips above it. Accordingly, we may now look at the 2012 Q2 high just above 104 as a potential target before 105.44. But there is a high chance of the price behaving bearishly in the near term. The possible retracement should be stopped either at 102.54/32 or at 101.93/78.

• Traders’ Sentiment

  Despite the U.S. Dollar becoming more expensive, traders do not seem to be discouraged to open even more long positions—their percentage went from 67% up to 72%. However, concerning the orders, the portion of buy ones dropped from 63% to 47%.

USD/CHF puts pressure on 0.91

“People were thinking the Fed might say more about tightening given that job numbers and other data have improved, but the FOMC essentially made it clear that the Fed won’t be tightening any time soon. The announcement has put a cap on the extent of the dollar rally.”

- Samson Capital Advisors (based on MarketWatch)

• Pair’s Outlook

  Yesterday’s test of the monthly R2 did not result in a rally above 0.91, but there is still a good chance the bulls are going to play the main role. Once this resistance is moved aside, there will be no significant levels between the spot and this year’s high at 0.9156. In case the rally extends beyond this point as well, regardless of the bearish monthly indicators, there is supposed to be a strong supply area next to 0.9250, represented by the 2013 Nov 7 high.

• Traders’ Sentiment

  There was just a slight decline in the percentage of long positions open in the market—from 74% to 71%, meaning an overwhelming majority of the traders is waiting for USD/CHF to go even higher from the current trading levels.