INTRADAY TECHNICAL ANALYSIS 17 MAY (observation as of 08:30 UTC)
[EURUSD]
Important Levels to Watch for:
- Resistance line of 1.04762 and 1.05298.
- Support line of 1.03690 and 1.03154.
Commentary/ Reason:
The euro rose about 0.30% on the dollar to $1.04619, having lost 1% in a month.
The dollar slipped for a third straight day on Tuesday, tempering a long rally as investors cashed out and trimmed bets on U.S. interest rate rises driving further gains, on fears of a recession.
Strength in stocks and lower T-note yields also curbed liquidity demand for the dollar.
The euro meanwhile garnered support on signs of stronger Eurozone price pressures that are hawkish for ECB policy after the German Apr wholesale price index that surged at a record pace, as well as on comments from ECB Governing Council member Villeroy on Monday who said, “a euro that is too weak would go against our price stability objective.”
Gains in the euro were limited after the European Commission cut its 2022 Eurozone GDP forecast and raised its 2022 inflation forecast.
The EUR/USD was trading in a narrow range of $1.0369 and 1.0476. On the daily chart suggests the advance could be short-lived. The pair keeps developing below firmly bearish moving averages, while technical indicators are correcting oversold conditions, holding within negative levels. The 20 SMA is currently around 1.0530, providing dynamic resistance.
Appearances from a handful of Federal Reserve speakers on Tuesday, including Chairman Jerome Powell at 1800 GMT, will be closely watched for any clues about whether near-term rate expectations could become even more aggressive.
[USDJPY]
Important Levels to Watch for Today:
- Resistance line of 130.074 and 131.014.
- Support line of 128.194 and 127.092
Commentary/ Reason:
The dollar remains on the front foot against the Japanese yen, at 129.485 and is holding above a two-decade trough.
The yen was weighed after BoJ deputy earlier today dismissed speculation about an early exit from accommodative settings despite price pressures.
As long as the Bank of Japan continues to fight interest rates rising in that country, it is essentially going to be a situation where the Japanese yen will continue to get hammered against almost all currencies while that is the case, especially with the Federal Reserve on the other side of this trade tightening monetary policy.
The USD/JPY hint to head to regain the main bullish trend again. Breaching 130.074 will lead the price to achieve additional gains that reach 131.014.
[GBPUSD]
Important Levels to Watch for:
- Resistance line of 1.24000 and 1.25120.
- Support line of 1.21760 and 1.20640.
Commentary/ Reason:
Sterling bounced about more than 1% on Tuesday from a two-year low and was steady at $1.24628.
The British pound has recovered after came under heavy selling pressure after the BoE last week warned that the UK economy could go into recession this year
Shift of focus to the inflation outlook and policy tightening prospects during the testimony by Governor Andrew Bailey and hawkish members Jonathan Haskel and Michael Saunders supported the pound.
Nevertheless, on top of the potential negative impact of the ongoing Russia-Ukraine conflict on the UK economy, renewed Brexit concerns should make it difficult for GBP/USD to go into a steady recovery in the near term.