INTRADAY TECHNICAL ANALYSIS 15 DECEMBER (observation as of 05:05 UTC)
[EURUSD]
Important Levels to Watch for:
- Resistance line of 1.13222 and 1.13497.
- Support line of 1.12332 and 1.12057.
Commentary/ Reason:
The euro was little changed at $1.12641 as traders are awaited on the FOMC meeting outcome later today, while the ECB will be out on Thursday, and market chatter points to an extension of financial support.
The euro is seen as vulnerable given expectations that the Fed will tighten policy faster than the ECB, where monetary policy is expected to lag.
Traders were watching the U.S. FOMC for two things: firstly, whether they accelerate tapering of their bond buying programme, and secondly whether policymakers bring forward their projections for interest rate rises, in their so-called "dot plot.
The EUR/USD is trying to stabilize after a recent sharp sell-off from 1.1600. The pair remains stuck around the 1.1300 figure and at the same time, developing inside a near-term wedge, reflecting the ongoing consolidation. The Momentum indicator has advanced above its midline, but the RSI indicator remains directionless at around 45.
[USDCHF]
Important Levels to Watch for:
- Resistance line of 0.92637 and 0.92885.
- Support line of 0.91833 and 0.91585.
Commentary/ Reason:
The greenback rose 0.10% higher against the Swiss franc, last traded at 0.92421 franc.
Higher T-note yields on Wednesday supported moderate gains in the dollar, along with weakness in stocks, which boosted liquidity demand for the dollar.
The dollar was also buoyed by the resumption of market expectations of Fed rate hikes in 2022. Market expectations on monetary policy changes have been the major driver behind the recent price actions in USD/CHF. Also holding meetings in the week is the Swiss central bank.
The Swiss franc meanwhile holds on to its safe-haven appeal in cautious trading as traders digested news of the Omicron variant of COVID-19.
[USDJPY]
Important Levels to Watch for Today:
- Resistance line of 114.058 and 114.316.
- Support line of 113.222 and 112.964.
Commentary/ Reason:
The yen softened slightly to 113.745 per dollar, continuing a weakening trend. The safe-haven currency had firmed sharply in late November, when the Omicron variant first emerged.
The prospect of rising short term rates meanwhile continue to support the U.S. dollar. Divergent monetary policies continued to influence the currency’s movement, as hawkish signals from the Fed contrasted with the BoJ’s firm commitment to retain easy monetary policies to achieve its 2% price stability target.
The USD/JPY also rose on strength in T-note yields. On top of that, a report Tuesday from Kyodo News weighed on the yen after the report said the BoJ was mulling extending emergency pandemic measures beyond March of next year.
[GBPUSD]
Important Levels to Watch for:
- Resistance line of 1.32673 and 1.32937.
- Support line of 1.31820 and 1.31557.
Commentary/ Reason:
The pound languished at $1.32385 as Britain grapples with rising cases of the Omicron variant of the new coronavirus.
Some traders have reversed earlier expectations that the Bank of England will raise rates on Thursday, following of the spread of Omicron in Britain. British Prime Minister Boris Johnson on Sunday said Britain faces a "tidal wave" of the Omicron variant of coronavirus and that two vaccine doses will not be enough to contain it. The government raised the coronavirus threat level and warned the rapid spread of the Omicron strain pushed the country into risky territory, making facemask obligatory again in the region.
Federal Reserve meeting due to wrap up later in the day stood out as the centrepiece of a week full of central bank meetings.
The GBP/USD keeps trading indecisively at the bottom of the six-month-old bearish channel and close to its new 2021 low of 1.3160 for almost a week now.
