Morning Market Update: Avoid Selling EUR/USD

EUR/USD Technical Analysis

EUR/USD suffered from moderate selling in the Forex market since the European Central Bank (ECB) Mario Draghi slashed rates earlier in September and notified the market of new Quantitative Easing (QE) measures. Many traders are holdings short trades in the Euro and some even anticipate further weakness from current levels. However, due to the heavy selling traders are likely to downsize their short positions ahead of Thursday, which may in fact trigger substantial gains in Euro-Dollar. Our technical strategy for Tuesday’s session is to exercise buy-on-dips strategies via intraday time frames. We would refrain from shorting EUR/USD. Key intraday resistance is noted at 1.2710, support can be found at 1.2644.

GBP/USD Technical Analysis

This is a crucial day for GBP as the current account and final Gross Domestic Product (GDP) figures are due to be released at 08:30am GMT. The Sterling failed to sustain its gains following the Scotland referendum outcome. Our intraday strategy for GBP/USD is looking for moderate weakness in today’s session due to a strong potential for a bearish flag on the 4hr chart. When 1.6207 will be breached, possibly due to the actual fundamental figures (current account and final GDP), the bearish flag will kick into play, paving the way for the market bears, targeting 1.6150. Strong resistance is noted at 1.6277.

USD/JPY Technical Analysis

Dollar-yen is in need for a much-needed technical correction. We were unable to find a decisive trend for today’s session, however, the weekly chart is already indicating the forthcoming weakness. We note the hanging man, a classic Japanese reversal pattern that was confirmed on the weekly close. Recent gains in USD/JPY were due to  Abe desires to reconstruct the Government Pension Investment Fund (GPIF), a move that is intended to weaken the Japanese yen. The intraday play for Dollar-yen will be to patiently wait for an hourly close below 109.12, which may provide a technical indication for further weakness. We do not have any entries for executing long trades, even at a higher price due to technical indicators being far in overbought territories.

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FX Expirations for Today

These are large options that are set to expire at 14:00 GMT in the Foreign Exchange market.

EUR/USD:  €1.2 billion option at 1.2750
AUD/USD:  AUD 315 million at 0.8850
USD/JPY: $1.1 billion at 109.50
EUR/GBP: €210 million at 0.7800

We are currently holding a long trade in crude oil from 92.94, maintaining a decent profit as crude oil is trading at 94.58. The bullish trade in Platinum is holding nicely while our short trade in EUR/CHF and USD/CHF is orbiting around our entry at the time of this writing. In the cryptocurrencies market we are expecting Bitcoin to reach $510 due to a reversal pattern that was affirmed on the weekly chart.

30/09/14 UPDATE: EURUSD was heavily sold, taking out the support level we mentioned in the morning update. GBP/USD retraced nicely of the resistance level we highlighted, testing the support of the potential bearish flag at the time of this writing.