INTRADAY TECHNICAL ANALYSIS 4 JANUARY (observation as of 06:00 UTC)

[EURUSD]

Important Levels to Watch for:

-        Resistance line of 1.13598 and 1.13905.

-        Support line of 1.12604 and 1.12297.

Commentary/ Reason:

  1. The euro was flat at $1.13037 on Tuesday after fell 0.6% overnight.

  2. A jump in T-note yields supported moderate gains in the dollar, while the ongoing surge of U.S. COVID-19 cases also fuelled safe-haven demand for the dollar after the 7-day U.S. COVID infection rate jumped to a new record high on Sunday.

  3. Concerns over Europe's slowing economic growth on the back of surging prices and rising COVID cases mounted, while the ECB is seen slower than other major central banks in tightening monetary policy. The bloc's central bank announced in December a reduction in the pace of its asset purchases due to the progress on economic recovery and towards its medium-term inflation target but signalled interest rates will be kept at record-low levels for some time.

  4. Elsewhere, the Fed said it would speed up its tapering of bond purchases, putting it on track to conclude it in March 2022 and paving the way for three interest rate hikes by the end of next year.

EURUSD

 

[USDCHF]

Important Levels to Watch for:

-        Resistance line of 0.92203 and 0.92548.

-        Support line of 0.91300 and 0.91087.

Commentary/ Reason:

  1. The dollar pared gains against the Swiss franc on Tuesday, traded at 0.911818 franc, though remained strong clinging to its 0.8% gains overnight.

  2. The U.S. dollar tracked firmer Treasury yields to print notable gains the previous day. Fed rate-hike concerns and virus updates were catalysts for the pair movement.

  3. Despite the continuous surge in new COVID-19 cases, investors remain optimistic over signs that the Omicron variant might be less severe than feared and is unlikely to derail the economic recovery. This was evident from a generally positive tone around the equity markets, which also undermined the safe-haven Swiss franc.

  4. On the other hand, the dollar drew some support from a fresh leg up in the US Treasury bond yields. Fed's hawkish outlook further acted as a tailwind for the greenback and provided a goodish lift to the USD/CHF pair.

USDCHF

 

[USDJPY]

Important Levels to Watch for Today:

-        Resistance line of 115.812 and 116.116.

-        Support line of 114.745 and 114.288.

Commentary/ Reason:                                        

  1. The dollar traded at 115.337 per yen, sitting at the highest levels since January 2017.

  2. The Japanese yen declined against the U.S. dollar on Tuesday on better demand for the greenback as U.S. Treasury yields increased.

  3. The rise in the U.S. yields was a sign that the U.S. dollar could extend last year’s rally as markets anticipate that the US Federal Reserve would initiate a cycle of interest-rate increases this year. 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.

  4. Looking forward, the Fed-driven sentiment and COVID updates will continue to have an impact on the yields, in turn, impacting the pair.

USDJPY

 

[GBPUSD]

Important Levels to Watch for:

-        Resistance line of 1.35428 and 1.35813.

-        Support line of 1.34179 and 1.33793.

Commentary/ Reason:

  1. The pound declined slightly against the dollar on Tuesday, traded at $1.34681 and slipped off the 7-week high struck on Friday.

  2. The British pound held its early January gains, as the UK government avoided imposing further coronavirus restrictions at the end of the year and as the Bank of England surprised investors in December by hiking interest rates from record-low levels. In addition, markets have priced in up to four BoE hikes next year.

  3. Sterling lost 1.1% against the US dollar in 2021, as concerns about the UK's economic recovery were exacerbated by a surge in energy prices, record rises in COVID-19 cases and post-Brexit tensions over the Northern Ireland protocol.

  4. In the meantime, the dollar is holding its ground against its major rivals and limiting GBP/USD's upside.

  5. The RSI indicator on the chart is holding just below 50, suggesting that buyers remain hesitant for the time being. On the upside, 1.3550 (December 31 high) aligns as first resistance ahead of 1.36 psychological level.

GBPUSD