EUR/USD probes 1.27

Technical Analysis

EUR/USD probes 1.27

“The probability that the Federal Reserve will turn to a hawkish stance is low.”

- IG (based on MarketWatch)

• Pair’s Outlook

  The Euro keeps grinding higher—the pair has already reached the initial resistance at 1.27 represented by the weekly pivot point and 20-day SMA. If the bullish tendency persists, the next supply area to try to stop the advancement is going to be at 1.2744 (2013 low). Still, the key level is 1.28, as it unites the monthly PP, weekly R1, 55-day SMA and a down-trend. This zone is expected to retain the medium-term bearish outlook intact.

• Traders’ Sentiment

  While the sentiment towards EUR/USD is neutral, interestingly enough, an increase in the value of the common currency was associated with a rise in the share of the buy orders—from 50 to 57%.

GBP/USD erodes resistance at 1.61

“We suspect that the recent strength in sterling will not develop into a sizeable bullish reversal pattern.”

- Swissquote (based on Reuters)

• Pair’s Outlook

  Yesterday the Cable was trading at the multi-month down-trend and most of the technical indicators were bearish. Accordingly, the bias towards the pair was negative. However, the bulls gained the upper hand and pushed the price above the resistance at 1.61. This implies the Sterling is going to move even higher, potentially up to 1.62. There the rally should come to an end and give way for a sell-off towards 1.5850.

• Traders’ Sentiment

  Relatively less than yesterday but nonetheless a majority (62%) of the SWFX market participants are long the British Pound. In the meantime, the percentage of sell orders went notably down, namely from 65 to 57%.

USD/JPY puts more pressure on 108

“The key is going to be the tone of the Fed’s statement, and I think the tone will be extremely cautious. In the near term, the dollar is going to be heavy.”

- Yuki Sakasai, Barclays (based on Bloomberg)

• Pair’s Outlook

  For the time being the demand at 108 is acting as a support. However, the bears seem to be persistent, and we cannot rule out a possibility of a deeper decline. In this case USD/JPY will be expected to pierce through the nearby supports and descend to 106.50, where the pair will have a good opportunity to stabilise at the 38.2% Fibonacci retracement of the Jul 17-Oct 1 rally. Nevertheless, the outlook for the US Dollar remains bullish.

• Traders’ Sentiment

  The present distribution between the bulls and the bears is exactly the same as 24 hours ago—40 and 60%, respectively. Concerning the commands placed 100 pips from the current market price, 56% are to purchase the Buck.

USD/CHF to use 0.9450 as a springboard

“With the end of the asset purchase program a foregone conclusion, speculation is once again mounting about the movement of interest rates.”

- IG (based on CNBC)

• Pair’s Outlook

  USD/CHF continues to retreat, as there are no significant support levels until 0.9450, where demand is implied by the 23.6% retracement of May 8-Oct 3 up-move. This area is also reinforced by the monthly pivot point, weekly S1 and 55-day SMA, making it the most likely lower boundary of the trading range in the short run. If reached, this support should trigger enough buying to drive the rate closer to 0.97.

• Traders’ Sentiment

  Just as in USD/JPY, the sentiment with respect to USD/CHF is also unchanged—58% of positions are long and the remaining 42% are short. As for the orders, there are now slightly more buy ones (63%) than at the time of the previous report (59%).