INTRADAY TECHNICAL ANALYSIS 18 MAY (observation as of 08:00 UTC)
[EURUSD]
Important Levels to Watch for:
- Resistance line of 1.05898 and 1.06383.
- Support line of 1.04327 and 1.03841.
Commentary/ Reason:
The euro paused it overnight strong bounce on the dollar to decline 0.27% to $1.05176 on Wednesday.
The European common currency touched $1.05632 earlier today, after rising 1.16% overnight, its largest day of percentage gains since March.
The euro moved higher after data showed Eurozone Q1 GDP rose more than expected. A hawkish comment from ECB Governing Council member Knot also gave the euro a boost when he raised the prospect of a 50-bps rate hike by the ECB.
The pair however, declined with the latest retreat in the major could be linked to the deteriorating market mood, which has revived the US dollar’s safe-haven appeal. Softer Chinese data and concerns over the aggressive Fed tightening outlook also spooked investors.
As observed on the daily chart, EUR/USD has stalled its recovery rally just below the bearish 21-Daily Moving Average (DMA) at 1.0589. The 14-day RSI has turned flattish after the latest rebound from lower levels, justifying the renewed weakness in the main currency pair. Should the selling pressure intensify, EUR bears could challenge the wedge resistance now turned support at 1.0432.
[USDCHF]
Important Levels to Watch for:
- Resistance line of 1.00222 and 1.00624.
- Support line of 0.98923 and 0.98522.
Commentary/ Reason:
The dollar rose 0.32% against the Swiss franc on Wednesday to trade at 0.99596 franc, after slipping to 1-week low yesterday.
The USD/CHF pair continued to decline yesterday to surpass 1.0000 barrier, but it stopped at the bullish channel’s support line that appears on the chart, accompanied by witnessing clear positive signals through stochastic, which supports the chances of resuming the bullish wave, waiting to test the 1.000 again.
Therefore, we expect the continuation of the bullish trend domination in the upcoming sessions, noting that breaking 0.989 will press on the price to achieve more bearish correction before turning back to rise again.
[USDJPY]
Important Levels to Watch for Today:
- Resistance line of 130.271 and 131.222.
- Support line of 128.369 and 127.418.
Commentary/ Reason:
The Japanese yen traded at 129.240 per dollar, having held above the 129 level against the greenback for much of the week so far.
The yen was supported after China aims to reopen businesses in the next two weeks. Shanghai has achieved zero-Covid status across its districts and the city is expected to gradually open up, aiming to resume normal life by June 1.
However, a higher US T-yields put an end to the yen's early in the week’s small recovery, as the Japanese currency is very sensitive to higher rates in the United States.
Japan's economy shrank for the first time in two quarters in the January-March period as COVID-19 curbs hit the service sector and surging commodity prices created new pressures, raising concerns about a protracted downturn.
The weak reading may pressure PM Kishida to release even more stimulus with upper house elections pencilled in for July 10, following the 2.7 trillion yen ($20.86 billion) in extra budget spending compiled on Tuesday.
As long as the BoJ 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 main trend is up according to the daily swing chart; however, momentum is trending lower. Breaching 130.271 will lead the price to achieve additional gains that reach 131.222.
A sustained move lower will signal the presence of sellers. If this move gains any traction, then look for the nearest support cluster at 128.369 and 127.418
[GBPUSD]
Important Levels to Watch for:
- Resistance line of 1.25472 and 1.26163.
- Support line of 1.23235 and 1.22543.
Commentary/ Reason:
Sterling slipped 0.66% to $1.24069 on Wednesday after climbed 1.39% in the previous session.
Sterling touched $1.24999 in the overnight rally, its best day since late 2020, helped by on stronger-than-expected UK labor market data that showed Britain's jobless rate hit a 48-year low and improvement in the broader risk sentiment in financial markets.
The dollar however was firming today after an overnight kicking, as U.S. yields surge. Benchmark 10-year Treasuries were steady in Europe and the yield sat just below 3% at 2.9805%.
On top of the potential negative impact of the ongoing Russia-Ukraine conflict on the UK economy, renewed Brexit concerns also make it difficult for GBP/USD to go into a steady recovery in the near term.
If GBP/USD buyers maintain control of the market in the coming sessions, we could see a move towards 1.2547 in short order. On the flip side, if sellers return and drive the exchange lower, initial support lies now at 1.2323. On further weakness, the focus shifts to around 1.2254.
