EUR/USD headed toward 1.31

Technical Analysis

EUR/USD headed toward 1.31

“We now expect the ECB to take some further policy steps at next week's meeting.”

- JPMorgan (based on CNBC)

• Pair’s Outlook

  The currency pair continues to grind lower and is about to hit the monthly S2 level, the last significant obstacle standing before 1.31. Here, despite the ’sell’ signals on the weekly time-frame, the bears might take a break and let the Euro make an upward correction, which in turn is supposed to end before the price rises above 1.33. And the ensuing bearish wave will have a good possibility to extend down to 1.2750—2013 low.

• Traders’ Sentiment

  As the single European currency loses value, there are more and more traders willing to enter long positions—their share has already increased to 61% of the market. At the same time the percentage of buy orders is falling—right now it is at 37% (43% yesterday).

GBP/USD preserves bearish momentum

“There's a possibility that the first rate hike might ... not come until the second half of next year.”

- Bank of New York Mellon (based on Reuters)

• Pair’s Outlook

  Soon after closing the downside gap GBP/USD turned around and resumed to decline. The pair has already fallen more than six figures since the beginning of this quarter, but is nonetheless seen as capable of moving even deeper South, possibly down to 1.6250 (2014 low). However, while the daily technical studies suggest the Sterling might soon test the monthly S3 at 1.6434, the monthly indicators are still in favour of a rally.

• Traders’ Sentiment

  A substantial majority (67%) of the SWFX market participants consider the British Pound to be oversold, as they are holding long positions. Concerning the orders, there is currently no difference between the buy (52%) and sell (48%) ones.

USD/JPY continues building pressure on 104

“Geopolitical risk continues to escalate. If you expect to see a further deterioration in conditions in Ukraine and northern Iraq, you’d want to be looking at these levels around 104 in dollar-yen to buy yen.”

- Bank of New York Mellon (based on Bloomberg)

• Pair’s Outlook

  Without reaching the monthly R1 level at 103.50 USD/JPY proved to be well-supported at the moment and returned to the resistance at 104. This supply area is composed of the 2014 Q2 high and monthly R2, making it difficult for the bulls to cross. Nevertheless, the bias is to the upside, also because of the daily and monthly technical indicators, most of which are presently pointing North. The medium-term target is this year’s high at 105.50.

• Traders’ Sentiment

  The market is undecided regarding USD/JPY, as the gap between the bull and bears is only six percentage points in favour of the former. But there is a significant skew in favour of the buy orders near the spot—they amount to 64% of all pending commands.

USD/CHF aims for 0.9250

“The turn in the rhetoric from the Fed, as well as the heightened expectations for greater accommodation coming from the ECB, has made the dollar really one of the best-performing assets so far in August. It’s really on a tear, and I suspect that it has room to run.”

- Tim Condon, ING (based on Bloomberg)

• Pair’s Outlook

  Although at the very beginning of this week the bears seemed to be winning and were in a good position to throw the rate back some 60-80 pips, in the end USD/CHF did not need to come down to 0.91 in order to receive a bullish impetus. The currency pair has just gained a solid foothold above 0.9150 and it is therefore likely to try to reach 0.9250 next month. This scenario is supported by all but monthly technical studies.

• Traders’ Sentiment

  The current distribution between the long and short positions is exactly the same as yesterday, when 57% of traders expected the U.S. Dollar to appreciate. As for the orders, 69% of them are to purchase the Buck against the Franc.