EUR/USD closes in on 2013 low

Technical Analysis

EUR/USD closes in on 2013 low

“The markets are starting to price in a euro-area economic malaise and the stimulus the ECB has provided may prove inadequate.”

- G Plus Economics (based on Bloomberg)

• Pair’s Outlook

  The European currency is still headed South, where it is about to meet one of the key levels, namely the 2013 low. This support, given its significance, may trigger profit-taking. The resulting rally may potentially extend up to the resistance at 1.31 without compromising the overall bearish outlook. But once the demand area at 1.2750 is penetrated, the 2012 low at 1.2050 will become the next long-term target.

• Traders’ Sentiment

  The present distribution between the bulls and bears is exactly the same as last week—60% of market participants believe the common currency is going to appreciate. On the other hand, the share of sell orders jumped from 63 to 67%.

GBP/USD slips back to 1.63

“Beyond any short-term profits that people may have made in the currency or equity markets throughout this week, the longer term prospects for the U.K. should now be better, especially as all the uncertainty surrounding the referendum is gone.”

- FxPro (based on MarketWatch)

• Pair’s Outlook

  Despite a significant risk of the Cable breaking the negatively-sloped resistance line at 1.6450 last week, in the end the bears took the upper hand and forced the Sterling to retreat to 1.63. And while the near-term technical indicators imply continuation of this sell-off further, the monthly studies suggest the downward momentum may have already been exhausted. But as long as the resistance at 1.6750 is not breached, the bears should be in control.

• Traders’ Sentiment

  Most of the SWFX market participants consider the Pound to be undervalued—59% of open positions are long. As for the pending orders, the difference between them is insignificant at the moment, only four percentage points.

USD/JPY hamstrung by 109

“The dollar looks on course to reach 110 yen this week backed by U.S. economic fundamentals. Still, a sizeable slide in equities and any verbal warnings by U.S. officials against the depreciating yen could be triggers for speculators to sell the dollar, which could slip rapidly.”

- IG Securities (based on CNBC)

• Pair’s Outlook

  The resistance at 109 proved to be a notable level last week, as it managed to stop a strong bullish momentum of USD/JPY. If the correction develops, the U.S. Dollar may fall down to the monthly R3 at 108. If there is not enough support to revive the rally, the dip could stretch down to 106.50, a two-month up-trend, and the bias will still be positive. In the meantime, most of the weekly and monthly technical indicators are pointing North.

• Traders’ Sentiment

  The SWFX traders’ sentiment remains distinctly bearish with respect to USD/JPY, being that the bears take up as much as 69% of the whole market. Concerning the orders, the buy ones are in a majority with a 66% share.

USD/CHF struggles to overcome 0.94

“The SNB doesn’t see the need to step in immediately but it makes clear with the weaker inflation outlook that the cap is key and will definitely be defended.”

- Natixis (based on Bloomberg)

• Pair’s Outlook

  On Friday USD/CHF recovered most of the ground it gave up a day before. However, there is still plenty of obstacles the pair needs to overcome in order to confirm its bullish intentions and reach the 2013 high at 0.98. The immediate resistance is at 0.9417, represented by the monthly R3, followed by the 2013 Sep high at 0.9450. Meanwhile, the key short-run support is at 0.93, created by the rising trend-line, weekly S1 and 20-day SMA.

• Traders’ Sentiment

  Just like last week the sentiment towards USD/CHF is neutral, as the percentages of long and short positions are nearly equal—55 and 45% respectively. But there are considerably more commands to purchase the Buck (76%) than to sell it (24%).