INTRADAY TECHNICAL ANALYSIS 16 JULY (observation as of 05:25 UTC)
[EURUSD]
Important Levels to Watch for:
- Resistance line of 1.18534 and 1.18750.
- Support line of 1.17834 and 1.17618.
Commentary/ Reason:
The euro stood at $1.18103, broadly steady Friday but heading for weekly losses, with a decline over the week so far of 0.5% against the dollar.
The pair were both weighted by the dovish comments from the policymakers.
Fed Chair Jerome Powell on Thursday signalling that it was premature to tighten the policy, reiterated that rising inflation is likely to be transitory and that the U.S. central bank would continue to support the economy, which drove U.S. Treasury yields lower.
Eurozone government bond yields fell, tracking U.S. Treasuries, as investors continued to assess the dovish commentary from Powell.
For the euro, ECB Governing Council member Visco on Thursday also said the Eurozone economy still has substantial slack didn’t expect monetary policy to be tightened soon.
Later today, traders are looking to U.S. retail sales data and consumer confidence for any reading on inflation and the strength of the recovery.
EUR/USD failed to extend the bounce off a 3-month low, staying inside a bullish falling wedge formation. Price action is likely to be contained going forward. The major currency pair expected to remain surrounding the 1.1810 threshold.
[USDCHF]
Important Levels to Watch for:
- Resistance line of 0.92115 and 0.92428.
- Support line of 0.91100 and 0.90786.
Commentary/ Reason:
The dollar staged a solid rebound off yesterday’s 3-week low against the Swiss franc, to trade at 0.91854 per franc on Friday, and headed to 0.4% higher for the week.
However, concerns about the spread of the highly contagious Delta variant of the coronavirus continued weighing on investors' sentiment, which was evident from a weaker tone around the equity markets. This might extend some support to the safe-haven Swiss franc.
The USD/CHF pair bounced upwards clearly yesterday, to keep the bullish trend scenario valid and active for the upcoming period.
However, any subsequent move up is more likely to confront stiff resistance and remain capped near weekly swing highs, around the 0.9200 mark. This should act as a key pivotal point for short-term traders and help determine the next leg of a directional move for the USD/CHF pair.
[GBPUSD]
Important Levels to Watch for:
- Resistance line of 1.39027 and 1.39393.
- Support line of 1.37840 and 1.37473.
Commentary/ Reason:
The pair is broadly steady on Friday but heading for weekly losses, with a decline over the week so far of 0.5% against the greenback.
Sterling traded at $1.38309, having handed back some of a bounce that came with strong jobs figures and hawkish comments on Thursday from BoE policymaker Michael Saunders. Saunders urged cutting short the BOE's bond-buying program and eventually raising interest rates, contrasting Governor Andrew Bailey. His remarks came after the UK reported an increase of 7.3% YoY in wages in May, which could turn into inflationary pressures down the road.
Another factor that could weight on the pound comes from the rapid spread of the Delta COVID-19 variant, just as the UK is set to abandon almost all restrictions on Monday.
On the contrary, a successful reopening could be a huge factor in terms of confidence and pricing a broader and sustained recovery of the global economy, leading to a softer dollar as economies from Japan to Europe catch up with the robust rebound in the U.S.
The GBPUSD pair is beginning to settle at the 1.380 support level, where oscillations are seeing price action return to this price level with consistency yet lacking conviction for the break. The pair is likely to consolidate within this range.
