INTRADAY TECHNICAL ANALYSIS 7 JULY (observation as of 07:30 UTC)
[EURUSD]
Important Levels to Watch for:
- Resistance line of 1.04479 and 1.05294.
- Support line of 1.01840 and 1.01024.
Commentary/ Reason:
The euro rose 0.34% at $1.02156 on Thursday after sinking as low as $1.01616 on Wednesday, for the first time since late 2002, fast approaching parity on the dollar.
The euro hovered near a two-decade low as fears over rising energy prices and potential shortages cast a long shadow over the bloc's economic outlook.
Thickening clouds over the European economy come just as the ECB is preparing to raise borrowing costs for the first time since 2011. The EUR/USD remains under pressure on concern the ECB will be slow to tighten monetary policy, which has weakened the euro’s interest rate differentials.
Europe's inflation is running at record levels and surging energy prices suggest the upward pressure on consumer prices will remain stiff for a while longer. With worry about the longevity of Russian gas supply to the west, benchmark Dutch gas prices have doubled since the middle of June. Year-ahead German electricity prices hit a record overnight.
As the Fed continues to tighten to contain inflation, the U.S. dollar is likely to appreciate further against other currencies. The Fed has been hiking rates aggressively, and minutes of June's meeting - when policy makers tightened by 75 basis points, the most since 1994 - revealed their concern that worsening inflation would erase faith in the Fed's ability to control it. Fed officials also said a 50 bp or a 75 bp rate hike at the July FOMC meeting as likely.
The EUR/USD pair remain around 1.0200 barrier, falling under continuous negative pressure coming by the EMA50, waiting to resume the bearish bias to visit 1.0184 as next main target.
Stochastic positivity might push the price to achieve some temporary intraday gains before turning back to decline again, noting that to test 1.0447 areas before any new negative attempt.
[USDCHF]
Important Levels to Watch for:
- Resistance line of 0.97291 and 0.97717.
- Support line of 0.95911 and 0.95485.
Commentary/ Reason:
The dollar struggles to extend the four-day session uptrend, to trade flat at 0.96985 franc on Thursday.
The Swiss franc standing out as a safe-haven currency as traders digested Fed’s latest meeting minutes.
A higher-than-expected Swiss inflation data also strengthened expectations of further hikes by the SNB. Annual inflation rose to 3.4% in June, the highest since 1993 and above the central bank’s expectations of 3.2% for Q3. In its last meeting, the SNB unexpectedly increased its key policy rate by 50bps, the first rate hike by the central bank since 2007 after holding the rate at the record low of -0.75% since 2015.
The USD/CHF pair touched the resistance line at 0.97329 to find solid resistance. Given the pair’s latest pullback, backed by the oversold RSI, the USD/CHF prices may decline further. However, the EMA50 support could offer a strong challenge to the sellers.
[USDJPY]
Important Levels to Watch for Today:
- Resistance line of 137.144 and 138.417.
- Support line of 134.598 and 133.325.
Commentary/ Reason:
Yen gained a little support from some safety bids to trade at 135.853 per dollar on Thursday.
The strength came as Japanese households' inflation expectations improved in the three months to June, with the ratio of homes expecting price rises over the coming year hitting the highest level in 14 years.
Though the Japanese yen will likely remain weak as a gap between Japanese and U.S. benchmark yields weighs on the currency.
The Bank of Japan also resolutely stuck to its ultra-dovish monetary policy, in contrast to a growing number of increasingly hawkish central banks overseas. BoJ has said it would not withdraw monetary stimulus because inflation is due to soaring fuel and raw material costs blamed on the Ukraine crisis and will likely prove temporary.
The USD/JPY pair provided positive trades yesterday before begins to decline by today’s open, supported by stochastic loss to the positive momentum clearly, waiting for more bearish bias to visit 134.598 as target.
Bearish trend will be continue to be suggested in the upcoming period unless the price rallied to breach 137.144 holding above them.
[GBPUSD]
Important Levels to Watch for:
- Resistance line of 1.21320 and 1.22056.
- Support line of 1.18514 and 1.17647.
Commentary/ Reason:
Sterling rose 0.305 to $1.19569 though still languished near a two-year trough with British Prime Minister Boris Johnson fighting to keep his job amid a mounting rebellion within his party.
Sterling was pinned by the latest political crisis to hit UK Prime Minister Boris Johnson's government following the resignations of two senior UK Cabinet ministers — finance minister Rishi Sunak and health secretary Sajid Javid — over his leadership.
Investors also digested balanced comments from Bank of England chief economist Huw Pill, who said he was willing to step up the pace of rate hikes depending on the economic data, but preferred a "steady-handed" approach to "one-off bold moves," which can "be disturbing."
The BoE has raised interest rates five times since December, raising rates to 1.25% from 0.1%.
The greenback meanwhile continued to strengthen its appeal as a safe-haven currency amid the risk-off sentiment surrounding the market.
