GBP/USD risks falling under 1.41

Technical Analysis

EUR/USD to trade range bound during holidays

“Hawkish Fed talk this week has caught a market that has largely underestimated the risk of U.S. rate rises, while lighter, pre-holiday trade seems to be enhancing the dollar's resurgence.”

- Western Union Business Solutions (based on Reuters)

• Pair’s Outlook

  As a result of the whole trading day on March 24, the most popular FX pair lost only six pips. Trading volume continued to slump as Easter holidays approached in many countries worldwide. Although smaller volume creates risks of higher volatility, we expect a quiet environment throughout Friday when only the FX market is opened. Key support is unchanged – the 38.2% Fibonacci retracement of an earlier March uptrend at 1.1145, strengthened by the 20-day SMA from below. Meanwhile, both daily and weekly technicals are EUR-bullish.

• Traders’ Sentiment

  Over the past 24 hours we have seen no swing from any side to another, meaning SWFX short traders are still holding a 12 pp majority over their long counterparts.

GBP/USD risks falling under 1.41

“Until the referendum takes place in June, we view the risk to our estimates of a weaker pound as standing to the downside, although we would note that the market is already starting from a net short position, whereas short cable became a more popular trade only around 10 days before the Scottish referendum in September 2014.”

- Goldman Sachs (based on Business Recorder)

• Pair’s Outlook

  The Cable managed to recover from its intraday low on Thursday, as fundamental data turned into Sterling’s favour. However, the acquired momentum was insufficient for the GBP/USD currency pair to retake the 1.42 major level. The weekly S1 and the 20-day SMA keep forming a relatively strong resistance cluster around the 1.42 mark, while the monthly PP is providing immediate support at 1.4141—just under today’s opening price. A breach of the monthly PP is likely to cause a decline towards around 1.4050, while the upper target is the 55-day SMA around 1.4286.

• Traders’ Sentiment

  Although not as strong as yesterday, but market sentiment remains bullish at 62% (previously 70%). At the same time, the portion of orders to acquire the British Pound increased from 54 to 58%.

USD/JPY closes in on channel’s resistance

“The higher dollar trend is becoming more evident against the yen. But the move broadly remains within an adjustment from the post-Fed bearishness.”

- Jun Kato, Shinkin Asset Management (based on Bloomberg)

• Pair’s Outlook

  The US Dollar was able to outperform the Japanese Yen on Thursday, with the 20-day SMA limiting the gains. The same level is acting as the closest resistance today, thus, might trigger a sell-off, erasing most of yesterday’s gains. The nearest support rests at 112.11, represented by the weekly PP, but in case bulls manage to push the USD/JPY currency pair over the 20-day SMA, then the current descending channel’s upper border is likely to stop the rally. Moreover, this resistance trend-line is also reinforced by the weekly R1. Meanwhile, technical indicators are now giving mixed signals, unable to confirm either scenario.

• Traders’ Sentiment

  Bullish traders’ sentiment returned to its Tuesday’s level of 73%, compared to 75% on Thursday. The share of orders to acquire the Buck almost doubled, having grown from 29 to 57%.

Gold: market closed after more losses on Thursday

“We think the dollar is going to be more range bound[…]. I think commodities can find a footing. They work back down and not make new lows. That would be a bullish setup for the market.”

- Oppenheimer (based on CNBC)

• Pair’s Outlook

  Bearish market participants continued to push gold prices to the downside on Thursday. At the same time, scope of the selloff is nowhere near a plunge we had observed one day prior to that. Basically, the bullion is set to hover in limbo after the commodity market returns back to trading on Monday. This is because the closest resistance lies at 1,227 (23.6% retracement of Dec-Mar uptrend) and the nearest support is the 1,205 mark (monthly PP), while Thursday trading closed somewhere is between at 1,216. Important signal: next week's technical indicators switched to a "strong buy" mode.

• Traders’ Sentiment

  At the moment about 42% of all trades are bullish, which is still the highest level of the past seven working days. The bears are therefore keeping a 58% portion of the market.

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