GBP/USD establishes new support at 1.61

Technical Analysis

EUR/USD capped by 1.2850

“It seems like quantitative easing by the ECB is within sight.”

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

• Pair’s Outlook

  Yet another attempt of the Euro to extend a recovery from 1.25 was stopped by the 23.6% retracement and 55-day SMA at 1.2850. This has notably increased the chance of the near-term up-trend at 1.27 failing to perform its function as a support line and being broken. If this is the case, we should soon see a re-test of the 2014 low with a subsequent major target at 1.2040 represented by the 2012 low, even though monthly studies are mostly giving ‘buy’ signals.

• Traders’ Sentiment

  Right now there is a perfect balance between the bulls and the bears, meaning the SWFX sentiment is neutral. Meanwhile, the share of the buy orders has fallen from 61 to 45% since the previous report.

GBP/USD establishes new support at 1.61

“There may be some support from the GDP. But the message from the Bank of England's chief economist on Friday was pretty gloomy: it's going to be very difficult for the UK to raise and the market is I think in that frame of mind. That may put sterling on the defensive against the dollar.”

- Rabobank (based on Reuters)

• Pair’s Outlook

  After violating the down-trend and reaching the next resistance at 1.6185 (weekly R1), the currency pair returned back to 1.61. If this level proves to be the new support, the Sterling will be expected to rise up to 1.63, where the demand is implied by the monthly pivot point and 55-day SMA. But if the bulls do not manage to lift the price, there is likely to be a quick decline to 1.5960 (monthly S1) and then to 1.5870 (2014 low).

• Traders’ Sentiment

  There was no real change neither in the sentiment of the market, nor in the distribution between the buy and sell orders. In the first case the bulls continue to dominate with 61%, whereas in the second case the sell commands are in the lead with 58%.

USD/JPY consolidates near 106.90/60

“Dollar-yen has retreated a bit on the back of receding Fed rate-hike expectations and the global risk-off move. Still, it’s difficult to say that we’re suddenly returning back to a scenario where expectations grow that the Fed will raise rates.”

- Sumitomo Mitsui Banking Corp. (based on Bloomberg)

• Pair’s Outlook

  USD/JPY spiked through the demand area at 106.90/60, but in the end the pair managed to recuperate and settle above the 55-day SMA and 38.2% retracement level. Here the US Dollar is in a good position to launch an attack on the monthly PP at 108, also considering that the weekly technical indicators are mostly bullish. Still, there is a substantial possibility of the bears not giving up and forcing the rate to re-visit the support at 105.90/60.

• Traders’ Sentiment

  For now the SWFX market cannot agree on the perspectives of USD/JPY—46% of traders believe the pair is bullish and 54% think otherwise. A similar situation is with the orders—a half is to purchase and a half is to sell the Greenback against the Yen.

USD/CHF fixated on 0.9450

“There’s no discussion, we will with utmost determination make sure that the minimum exchange rate is not questioned, either with unlimited purchases of foreign currency, and if necessary we will take further measures immediately. We have a franc that is highly valued.”

- Fritz Zurbruegg, SNB Governing Board Member

• Pair’s Outlook

  As it turned out, the 55-day SMA at 0.9390 was enough to prevent further decrease in the value of the Buck. Not only that, but USD/CHF is once again trading above the monthly PP, which is an argument in favour of a larger rally. The nearest resistance is at 0.9529 (20-day SMA), while the recently violated up-trend is at 0.9571 together with the weekly R1. However, 0.9465/40 should prove to be a reliable support first.

• Traders’ Sentiment

  The traders are much less optimistic with respect to USD/CHF than yesterday, but they mostly expect a surge—57% of open positions are long (64% yesterday). Concerning the orders set 100 pips from the current market price, 53% are to buy and 47% are to sell.