EUR/USD falls to 1.1260 after bearish rally

Technical Analysis

EUR/USD falls to 1.1260 after bearish rally

“[The Fed] giving up could trigger sharp market moves in our view, close to the dollar’s move after the Fed announced QE tapering.”

- Bank of America Merrill Lynch (based on MarketWatch)

• Pair’s Outlook

  US fundamentals used to have little influence on the Dollar, because this currency continued to advance at the fastest daily pace since January. EUR/USD sank 112 pips and put an end to the eight-day long sideways development. It breached the weekly S1 and the 20-day SMA, thereby switching attention to the 1.12 mark that is backed by the monthly pivot and the last weekly demand line. An immediate failure below here is unlikely, given the approaching 55-day SMA at 1.1161. Long-term dips will have to be capped by the 200/100-day SMAs at 1.1053/30.

• Traders’ Sentiment

  Just 42% of all SWFX positions are bullish in the morning on Thursday, no change over the preceding working day. Meantime, commands are set predominantly short on the Euro, namely 61% of them.

GBP/USD prolongs bearish trend

“For many, the idea of a Brexit seems unlikely and any devaluation in sterling should therefore be seen as a temporary opportunity.”

- IG (based on WBP Online)

• Pair’s Outlook

  With the return of ‘Brexit’ fears the Pound declined against the US Dollar yesterday, also bouncing back from the four-week down-trend. The Cable retains its weakness today, therefore, is likely to drop at least towards the nearest support, namely the weekly PP at 1.4151. However, bears might even push the GBP/USD currency pair even lower, with the 1.41 level getting pierced again. The second target will then be around the 1.40 mark, but the bearish momentum is unlikely to edge below the 1.4050 level, as it prevented the given pair from slumping since the beginning of March. Furthermore, technical studies are bolstering the possibility of the bearish outcome.

• Traders’ Sentiment

  Bullish market sentiment returned to its Tuesday’s level of 64%, up from 61% yesterday. The number of buy orders slid from 60 to 45%.

USD/JPY in limbo ahead of inflation data

“The dollar/yen might not go much higher for now because people are a bit knackered after covering short positions.”

- Global-info Co. (based on CNBC)

• Pair’s Outlook

  The risk appetite returned to the markets on Wednesday, causing the USD/JPY currency pair to edge higher, despite rather weak US Retail Sales figures. Momentum, received after reconfirming the 18-month low, appears to be sufficient for the Buck to sustain a short-term bullish trend. Consequently, the US Dollar is expected to continue rising versus the Japanese Yen, with the closest area to limit the gains located around 110.80, represented by the monthly S1, the weekly R1 and the 20-day SMA. However, according to technical indicators, the given pair is to suffer a loss today, falling back under the 109.00 major level, eventually putting the 18-month low to the test again.

• Traders’ Sentiment

  Nearly three quarters (74%) of all open positions are long. Meanwhile, the gap between buy and sell orders narrowed from 4 to 2% points.

Gold is losing ground for three days

“Definitely the boost in the dollar and strength in equities will put pressure on the gold market.”

- RJO Futures (based on Bloomberg)

• Pair’s Outlook

  After a relatively calm Tuesday, the bullion commenced a major bounce from three-week highs yesterday and closed the US session around the monthly pivot point (1,241.50). However, a selloff has continued this morning on the back of growing risk appetite worldwide. Now the weekly pivot is under bearish pressure, but the bulls hope the 55-day SMA (1,223.48) along with the weekly S1 (1,221.33) will be capable of limiting those negative changes. Otherwise, we would not rule out a slump towards the March low at 1,208.06.

• Traders’ Sentiment

  A continuous plunge in gold prices is provoking a closure of short positions in the SWFX market. Over Wednesday the percentage of bearish trades dipped from 66% to 63%. However, the majority is solid and only a small share of market participants, at least for now, suspects the stance should be changed from bearish to bullish.

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