EUR/USD retreats to 1.11 as Fed rate bets rise

Technical Analysis

EUR/USD retreats to 1.11 as Fed rate bets rise

“Dollar strength has been seen to restrain the Fed in some way, but I think, obviously, so far this year, the dollar appreciation has very clearly unwound.”

- State Street Global Markets (based on Bloomberg)

• Pair’s Outlook

  EUR/USD ended the Monday session with a slight loss of about 35 pips, as it touched the 1.11 mark where a declined was ultimately stopped. US Dollar gained ground amid expectations the Fed is going to raise interest rates, albeit only later in 2016 and not tomorrow. Considerable downturn is not expected, given a formidable support area under 1.1045. Contrary to that, we foresee a continuation of the leg up to the five-month downtrend at 1.1350, before another selloff takes place. Within the triangle pattern, trading range is likely to gradually narrow down.

• Traders’ Sentiment

  While yesterday the bearish market portion surged to 57% before the European session, over the trading day it has seen a setback down to 55%.

GBP/USD gravitates towards 1.4140

“Expectations for dovishness from the Bank of England could see the pound underperform other risk correlated currencies, especially if the jobs data isn't strong.”

- Josh O' Byrne, Citi (based on Reuters)

• Pair’s Outlook

  Bullishness of the Cable that we have been observing since the beginning of March proved to be insufficient to carry the price over the monthly R1. The currency pair bounced off of 1.4446 and even closed below the 55-day SMA. The target is now the monthly pivot point at 1.4141, where the bulls will have a good opportunity to recuperate and launch a yet another attack on the weekly R1. If they are successful, the Sterling will be expected to appreciate to 1.47 dollars over the next several weeks.

• Traders’ Sentiment

  There are a lot more bulls today than yesterday. The percentage of long positions surged from 55 to 66%, meaning the Pound is now overbought. As for the orders, the share of buy ones jumped from 51 to 61%.

USD/JPY approaches apex of the triangle

“We remain in a structural bull market for the U.S. dollar, which has a further 10-15% to go.”

- Andrew Sheets, Morgan Stanley (based on MarketWatch)

• Pair’s Outlook

  USD/JPY keeps consolidating within the boundaries of the symmetrical triangle. Eventually, the pattern is expected to be broken to the downside, considering that the bears remain in control of the market. The negative outlook is reinforced by the technical indicators in the weekly and monthly time frames. During the next several days, the US Dollar might recover to 113.70, on the condition that it manages to confirm the trend-line at 112.90. Once the lower boundary of the pattern is broken, there is likely to be a long-term sell-off, potentially down to the 2014 low at 100.80.

• Traders’ Sentiment

  There are less bulls in the market, but only marginally—their share declined from 74 to 72%. Concerning the orders, there is now no visible difference between the amounts of buy (49%) and sell (51%) ones.

Gold depressed by more confident Greenback

“I think there are too many long positions in the market. They are taking some profit.”

- Lee Cheong Gold Dealers (based on CNBC)

• Pair’s Outlook

  Unexpectedly high bets on rate increases from the US Federal Reserve later in the year pushed the yellow metal noticeably down against the American currency. The February uptrend was tested for the first time since early March and now the 20-day SMA and weekly S1 are at risk of being violated. A slump under the 1,230 level should expose the monthly pivot point at 1,205. Daily technical indicators are not signalling to the upside any more, while trading volume dipped to the lowest level since Feb 15. It may add to increased market volatility in the foreseeable future.

• Traders’ Sentiment

  The negative gap between traders, who are looking for gold's downside tendency and those who are betting on an increase, narrowed to ten percent over the previous working day. This is down from 16 pp just after the weekend.

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