INTRADAY TECHNICAL ANALYSIS 21 OCTOBER (observation as of 05:40 UTC)
[EURUSD]
Important Levels to Watch for:
- Resistance line of 1.16730 and 1.16953.
- Support line of 1.16008 and 1.15785.
Commentary/ Reason:
The euro held firm, buying $1.16515 and staying close to Tuesday’s three-week peak of $1.16688.
The euro moved higher but remained below Tuesday’s 3-week high as the longer-dated U.S. Treasury yields rose on expectations of growth and inflation.
The common currency is weighted amid expectations the U.S. Fed will be tapering faster than the ECB.
The EUR/USD pair continues to make attempts at the 1.167 resistance line, as moderate bullish momentum is currently driving price action, and another test of the resistance line is to be expected.
[USDCHF]
Important Levels to Watch for:
- Resistance line of 0.92504 and 0.92721.
- Support line of 0.91800 and 0.91583.
Commentary/ Reason:
The dollar marginally moved against the Swiss franc on Thursday, traded at 0.91898, hovering just above the 0.91838, its lowest level since September 15.
The USD/CHF has pulled back to hover around a key support level. A sharp rise in bearish sentiment in yesterday’s trading did not result in a break of the price line, therefore today’s session will determine whether the uptrend will be reversed.
The pair price stuck between 0.925 and 0.918 levels that represent the next trend keys, waiting to breach one of these levels to detect the next destination clearly.
The dollar is lacking some catalysts to contain the ongoing correction, and any support to the greenback may need to come from a cool-off in the recent risk-on mood in markets.
[USDJPY]
Important Levels to Watch for Today:
- Resistance line of 114.776 and 115.056.
- Support line of 113.870 and 113.590.
Commentary/ Reason:
Reduced demand for safe-haven assets saw the dollar hit a four-year high of 114.692 versus the yen overnight, before gives up gains, retracing to 114.110 on Thursday, as it slipped 0.15%.
USD/JPY fell back as lower T-note yields sparked short covering in the yen. The decline of more than 1% in the Nikkei equity index also lend support to the yen.
Investors also assessed whether higher inflation would prompt central banks to raise interest rates sooner than expected.
The USD/JPY pair appears to be at the beginning of a reversal. Selling pressure in yesterday’s trading showed that bullish sentiment likely no longer dominates price action. A series of small-bodied candles represent indecision, suggesting that rally has lost steam and indicates that sellers currently lack the conviction to drive the reversal.
[GBPUSD]
Important Levels to Watch for:
- Resistance line of 1.38488 and 1.38873.
- Support line of 1.37239 and 1.36853.
Commentary/ Reason:
The British pound eased 0.10% to $1.38105 on Thursday, just shy of its overnight high of $1.38339, its highest level in over a month.
Sterling held its momentum due to rising expectations of BoE rate hike. The BoE is expected to raise interest rates as soon as next month to curb inflation, despite data that showed that British inflation slowed unexpectedly last month.
The BoE will be the first major central bank to raise interest rates in the post-pandemic cycle, but economists polled by Reuters think the first hike will not come until early next year, later than markets are pricing in.
The GBP/USD pair has rallied significantly, rose more than 0.70% in the last two days, and bullish sentiment looks set to continue as buying pressure has continued to rise into the move, looking towards the 1.3850 area, an area that has been resistance in the past.