EUR/USD drops after volatile US session

Technical Analysis

EUR/USD drops after volatile US session

“With the last decision it was very clear to me that the hawks took over the steering wheel. That could be the real story for 2016: not only how willing is the ECB to do more but also are they still able to?”

- Rabobank International (based on Bloomberg)

• Pair’s Outlook

  EUR/USD became increasingly turbulent after the US session began yesterday. From daily highs, the pair dipped about 75 pips to close at 1.0919. As a result of this move, the weekly pivot point was penetrated, while the main support at 1.09 is offered by 55/20-day SMA, weekly S1 and monthly R1. Hence, the Euro has a good chance of getting a reliable bullish momentum from this demand zone. In the meantime, the gains are still estimated to be contained around 1.10 (Bollinger band; weekly R1, 50% Fibo).

• Traders’ Sentiment

  The bears continue outperforming bulls in terms of open positions by a margin of 57% to 43%. However, for now only 35% and 43% of the pending commands are set to acquire the Euro in 50 and 100-pip ranges from the spot, respectively.

GBP/USD poised for more weakness

“The Bank of England has recently created more of a divergence in policy expectations between itself and the Fed and that’s weighing down more on cable.”

- Bank of Tokyo-Mitsubishi UFJ Ltd. (based on Bloomberg)

• Pair’s Outlook

  The Cable was pushed down below the 1.48 major level on Tuesday, amid a strong reading of US fundamental data. Even though trade closed at 1.4820, technical studies retain their bearish signals, suggesting the GBP/USD might edge lower for the third consecutive day. At the same time, the monthly and weekly S1s are providing resistance around 1.4860, while support is represented by the weekly S1 and the Bollinger band circa 1.4750. A return inside the falling wedge’s trading range for the second time would be a positive surprise, but it would still diminish the pattern’s viability.

• Traders’ Sentiment

  Bullish traders’ sentiment remains unchanged at 65%, whereas the portion of orders to buy the Pound added 2% points up to 53%.

USD/JPY struggles to breach weekly PP

“The yen is basically expected to weaken on U.S.-Japanese yield differentials. But it will be exposed to volatility until U.S. economic growth looks assured, and we could see even wider swings in case of a warm winter.”

- SMBC Nikko Securities (based on Reuters)

• Pair’s Outlook

  The Greenback managed to outperform the JPY yesterday, due to the boost provided by the strong US fundamentals. However, still being under relatively high pressure, the USD/JPY barely recovered from intraday losses and climbed only five pips higher, unable to touch the immediate resistance. This resistance in face of the weekly PP is likely to prevent the pair from advancing today as well. Technical studies are bolstering this possibility, but the nearest support lies out of reach circa 119.60, now reinforced by the up-trend. Nonetheless, trade is expected to close around 120.10.

• Traders’ Sentiment

  Now 41% of all positions are long and the remaining 59% - short, while the share of buy orders barely changed: slid from 62 to 61%.

Gold steadied despite rising trading volume

“We are still cautious of choppy and illiquid conditions as there is very little depth in this market at present and could be subject to being pushed around.”

- MKS Group (based on CNBC)

• Pair’s Outlook

  The yellow metal saw completely no movement in either direction on Tuesday of this week, given that traders took a pause in the run up to New Year holidays. Despite that, the volume of trading increased on Monday and Tuesday towards daily averages. XAU/USD keeps hovering below 20-day SMA and weekly PP for the moment, meaning the weekly S1 is at risk of being breached in the short-term. If a break-out below 1,065 takes place, then the attention will shift to the next demand at 1,055 (weekly S2).

• Traders’ Sentiment

  We are observing little changes in terms of the SWFX market sentiment towards gold. Traders decided to keep their open positions unchanged from yesterday, meaning the bulls are still holding 54% of all trades versus 46% for the bears.

•  Download Full Daily Forex Technical Overview

  Don't miss our new daily forecasts for EUR USD, GBP USD, USD CAD and USD JPY!