EUR/USD to extend recovery

Technical Analysis

EUR/USD to extend recovery

“The combination of [the retail sales and PPI] and the pretty awful data we’ve seen thus far in September is pushing back when the Fed will hike, lowering the odds of December and raising the odds of 2016.”

- Credit Agricole (based on MarketWatch)

• Pair’s Outlook
  

  The fundamentals overrode technicals yesterday, and weak US data threw EUR/USD over several important resistances, paving the way for an extension of this rally. The upside is no longer limited by the monthly R1 and September high. And even though the long-term indicators are bearish, the pair has a good chance to visit monthly R2 at 1.1613 and even attempt to break higher. Still, we would like to see confirmation of the new support at 1.1450 first.

• Traders’ Sentiment

  Yesterday’s spike resulted in a change in the SWFX sentiment, which became bearish (61% of positions are now short). At the same time we note a material increase in the share of buy orders. These could be SLs that may accelerate the move if the price keeps rising.

GBP/USD in limbo, awaits US data

“Rather than advancing higher or attempting to recover momentum against the dollar, it looks far more likely that sterling will continue drifting towards $1.51, with this being the level where traders found confidence throughout previous weeks that this might be a 'bottom' for the pair.”

- FXTM (based on Business Recorder)

• Pair’s Outlook
  

  In spite of worse-than-expected UK fundamentals, the Cable managed to surge on poor US economic data on Wednesday. The 229-pip rally was stopped only by the third resistance cluster around 1.5485, which might cause the Sterling to undergo a correction today. Nevertheless, if the US data turns out to be weak again today, the British Pound could reach a four-week high at 1.5568, bolstered by the 38.20% Fibo at that point. Technical studies also suggest the given pair is to edge higher by the end of the day.

• Traders’ Sentiment

  The number of long positions remains unchanged since yesterday, taking up 58% of the market. The share of purchase orders, on the other hand, increased 17 percentage points to 52%.

USD/JPY on the edge of breaking ten-month support

“We look for annual headline inflation to slip into negative territory (+0.2% to -0.1%/y) while core inflation should hold firm at +1.8%/y (all as mkt expects).”

- TD Securities (based on FXStreet)

• Pair’s Outlook
  

  Although the Buck broke out of its four-week consolidation range, the wider trading range remains intact. Technical indicators are now giving bearish signals, but a tough support rests near 118.50, as it held the pair from falling since February 2015. Another set of very weak data is required to push the USD/JPY beyond this level; therefore, a rebound is possible, with the Greenback’s upside border lying around the 120.00 level, also surrounded by a number of resistances. However, risks of breaking the 118.50 support also persist, which could then trigger a sharper fall towards the Jan low.

• Traders’ Sentiment

  Bullish market sentiment returned to its Tuesday’s level of 74%, whereas the portion of buy orders sharply dropped from 76 to 49%.

Gold runs over 200-day SMA

“The fact that gold is above the 200-day average after five months, it’s a very strong signal that gold is on the uptrend for the time being. The strength in the gold market is going to stay for a while.”

- Sumitomo Corp. Global Research (based on Bloomberg)

• Pair’s Outlook
  

  We received a strong bullish signal yesterday, as gold effortlessly pierced through a dense resistance area, which was initially though to be able to hold the bulls at bay. This means the price is highly likely to keep increasing, while the next serious level will be only at 1,205 dollars, represented by the monthly R3. However, this resistance is unlikely to stay intact for long. Above it XAU/USD will continue its journey towards 1,230, where the highest level since May merges with the major falling resistance trend-line.

• Traders’ Sentiment

  People trading gold seem to ignore gold’s recovery. The sentiment has hardly changed since yesterday: the share of longs only fell from 52 to 50%. There are also no significant changes in the longer-term perspective: five days ago 53% of all open positions were long.

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