EUR/USD refuses to close the gap

Technical Analysis

EUR/USD refuses to close the gap

“Euro/dollar is vulnerable to testing new lows. A downtrend is easily formed given the opposite directions Fed and ECB monetary policies are seemingly headed... political trouble in France, a core euro zone country, is also a bearish factor.”

- Societe Generale (based on CNBC)

• Pair’s Outlook

  EUR/USD stayed largely unchanged yesterday near 1.32, even though the currency pair opened this week with a large 40-pip downside gap and therefore is likely to close it before testing 1.31. However, the bullish correction should not extend beyond the resistance at 1.33 (2013 Q4 low and monthly S1). Instead the price is expected to slip beneath 2013 Sep low and then target the last year’s low at 1.2750.

• Traders’ Sentiment

  The bullish SWFX market participants remain in majority—right now they take up 59% of the market. As for the pending orders placed 100 pips from the spot, the percentage of buy ones fell from 61 down to 43%.

GBP/USD tests weekly PP

“Following the latest and decisive break below the 200-DMA (now resistance at $1.6682) we see the bears in full control, shooting for a straight extension towards $1.6394.”

- JP Morgan (based on Reuters)

• Pair’s Outlook

  The Cable has already closed the downside gap, but even so it continues to move North. If this bullish tendency, opposed by the daily technical indicators, persists, the Sterling will soon hit the weekly PP and monthly S2. In case these resistances fail to stop the up-move, the supply at 1.67 (May low and weekly R1) will be there to prevent further increase in price and reignite a sell-off that was started two months ago at 1.72.

• Traders’ Sentiment
  
  There have been no notable changes neither in the distribution between the long (66%) and short (34%) positions, nor between the buy (48%) and sell (52%) orders, despite the Pound currently outperforming the U.S. Dollar.

USD/JPY falls back from 104

“The fact that dollar-yen was overbought might see it pull back a little bit to a more reasonable level. Geopolitics could be a driver as well, because it strengthens the yen.”

- IG (based on MarketWatch)

• Pair’s Outlook

  Regardless of the daily and monthly technical indicators mostly pointing upwards, USD/JPY is currently undergoing a downward correction. At the moment the bears are in control of the market, but are likely to step aside once the rate reaches the demand at 103.50, where the monthly R1 and weekly PP levels coincide. However, if this is not enough to restore the upward momentum, there is also the July high and weekly S1 around 103.

• Traders’ Sentiment

  The last time the sentiment of the SWFX market towards USD/JPY was neutral was back in January. Now there is also no significant difference between the amounts of bullish (54%) and bearish (46%) positions.

USD/CHF to look for support at 0.91

“The dollar rally that has remained elusive for all of this year is starting to gather some momentum.”

- Commonwealth Foreign Exchange (based on Bloomberg)

• Pair’s Outlook
  
  Although many of the daily and weekly studies were bullish, a rally above 0.9150 turned out to be unsustainable, and USD/CHF is currently falling. The nearest point where there is likely to be a change of command from bears to bulls is at 0.91, a level that proved to be significant earlier this year. In the meantime, the main support is at 0.90, where the four-month up-trend merges with the monthly PP and 55-day SMA.

• Traders’ Sentiment

  There is presently only a small difference between the long and short positions, but still in favour of the former—14 percentage points. Concerning the orders, 55% of them are to acquire and 45% are to sell the Buck against the Franc.