USD/JPY rebounds from 200-day SMA

Technical Analysis

EUR/USD returns to 1.3350

“The market is likely to be in euro short positions. So I am bit worried that there could be some short-covering [in the euro.”

- Koichi Takamatsu, Nomura Securities (based on Reuters)

• Pair’s Outlook

  As expected, EUR/USD did not rise above the three-week down-trend resistance at 1.3390/80, instead it declined down to 1.3345/40. Considering that the market on the whole is bearish, the latter level is supposed to be broken to the downside, which in turn would expose the 2013 Q4 low at 1.33. Overall, as long as the falling trend-line at 1.35 is intact, the currency pair is likely to target 1.31, namely the 2013 September low.

• Traders’ Sentiment

  There is currently no significant difference neither between the bullish (54%) and bearish (46%) market participants nor between the buy and sell orders placed 50 (50 and 50%) and 100 (48 and 52%) pips from the spot price.

GBP/USD trades sideways

“The key is Jackson Hole this week, we’re looking, on balance, for a dovish view from Yellen. That’s not particularly good for the dollar, on a broad term basis.”

- Standard Chartered (based on Bloomberg)

• Pair’s Outlook

  The Cable, despite opening this week 40 pips above the Friday’s close, is not trying to close the upside gap for the time being. Right now the Sterling is trading flat just below the major resistance at 1.6768/39, created by the 200-day SMA and monthly S1. The currency pair is unlikely to rally above this zone—a chance of the May low at 1.67 being breached is presumably higher. However, the long-term technicals continue pointing upwards.

• Traders’ Sentiment

  The SWFX market is slightly less bullish with respect to the British Pound than yesterday, but the longs are nonetheless in a majority, taking up 58% of the total number of positions. Meanwhile, the share of the buy orders increased from 55 to 59%.

USD/JPY rebounds from 200-day SMA

“I think many people want to test the dollar's upside but on the other hand, you can't expect Yellen to be hawkish and the BOJ is unlikely to ease its policy soon. I doubt it can rise above 103 yen.”

- a senior trader at a Japanese bank (based on CNBC)

• Pair’s Outlook

  USD/JPY did in fact find support at 102.38/30 yesterday, where the 200-day SMA joined forces with the monthly PP. Now the price should move towards the July’s high at 103 that needs to be overcome in order for the U.S. Dollar to confirm its long-term bullish intentions. If the attack turns out to be successful, the next objective will be the monthly R1 at 103.50, followed by the 2014 Q2 high at 104; however, there should be no dips below 102 in the meantime.

• Traders’ Sentiment

  While there has been almost no change in the distribution between the long (73%) and short (27%) positions, the percentage of buy orders placed 100 pips from the spot has plunged from 64 down to 43% since the previous report.

USD/CHF is inclined to rise

“The U.S. data has been relatively supportive for the dollar.”

- Bank of New Zealand (based on Bloomberg)

• Pair’s Outlook

  USD/CHF is currently forming a flag pattern, which implies resumption of the July rally at some point. The pair has just confirmed the support at 0.9016 (monthly PP), and it is rapidly advancing towards 0.91, which has been preventing appreciation of the Dollar for the past three weeks. A breach of this resistance will instantly endanger the supply area around 0.9160, where the monthly R1 merges with the 2014 high.

• Traders’ Sentiment

  The U.S. Dollar becoming more expensive did not have any effect on the positioning of the market—just as yesterday, 74% of open positions are long. As for the orders, their portion 50 pips from the spot dropped quite noticeably, from 69 to 44%.