INTRADAY TECHNICAL ANALYSIS 19 JANUARY (observation as of 07:00 UTC)

[EURUSD]

Important Levels to Watch for:

-        Resistance line of 1.14215 and 1.14629.

-        Support line of 1.12873 and 1.12459.

Commentary/ Reason:

  1. The euro was flat on Wednesday, traded at $1.13295 and hovering just above the 1-week low of $1.13145 touched Tuesday, its sharpest daily drop in a month.

  2. The dollar was firm after a rip higher in U.S. yields to a 2-year high vaulted it up sharply on the euro overnight, putting it back above support levels that have held for the past few months in anticipation of rising U.S. interest rates.

  3. The divergence in central bank policies also put the EUR/USD under pressure. The U.S. Federal Reserve meets to set policy next week and traders are growing anxious about another hawkish surprise. Fed funds futures are pricing three more hikes in 2022. Analysts say dollar strength could extend if traders start expecting rates to rise not just faster but further as well.

  1. A supportive factor for EUR/USD was Tuesday’s data that showed the German Economic Sentiment improved to 51.7, while that for the EU jumped to 49.4 – much better than anticipated. Also, the 10-year German bund yield climbed to a 2-1/2-year high Tuesday at -0.005%, which benefits the euro’s interest rate differentials.

  2. The EUR/USD pair opens the door for an extension below the 1.128 region. And below that is the support zone that started all of this, coming into play in late-November to finally quell that EUR/USD sell-off that was so prominent for the six months prior. The pair is down for a third consecutive day.

EURUSD

 

[USDCHF]

Important Levels to Watch for:

-        Resistance line of 0.91917 and 0.92124.

-        Support line of 0.91247 and 0.91040.

Commentary/ Reason:

  1. The dollar slipped 0.14% against the Swiss franc to trade at 0.91574 franc on Wednesday.

  2. While the dollar was supported from higher T-note yields, the moves in the stocks market unsettled equity investors, underpinning the Swiss franc as a safe-haven currency.

  3. Intraday bias in USD/CHF remains neutral for the moment. On the upside, above 0.919 will target 0.921 resistance instead. On the downside, further decline would be seen back to 0.912 support first.

USDCHF

 

[USDJPY]

Important Levels to Watch for Today:

-        Resistance line of 115.315 and 115.953

-        Support line of 114.039 and 113.401

Commentary/ Reason:                                        

  1. The Japanese yen changed hands at 114.280 per dollar, rose 0.28% on Wednesday.

  2. Moves in the U.S. bond market unsettled equity investors, underpinning the safe-haven yen.

  3. With market participants back on yield watch, with the US 10-yr at 1.83%, the subsequent pullback across the equity space has supported the Japanese Yen as the US curve continues to flatten.

  4. Japan's yen initially fell after the Bank of Japan said it would stick to its ultra-loose monetary policy despite hopes the economy is finally kicking clear of deflation. The yen remained pressured as monetary policy between Japan and other countries continued to diverge.

  5. The USD/JPY pair has failed to find the support to drive a rally. Given the rise in selling pressure in, we may now see another test of the trendline. Momentum indicators have flattened in neutral/bullish territory.  

USDJPY

 

[GBPUSD]

Important Levels to Watch for:

-        Resistance line of 1.36669 and 1.37017.

-        Support line of 1.35544 and 1.35197.

Commentary/ Reason:

  1. Sterling climbed back some 0.10% to $1.36049 after taken a knock overnight following the jump of the 10-year T-note yield to a 2-year high, which strengthens the dollar’s interest rate differentials. 

  2. The British pound focus will be on the British inflation figures later today. Annual headline inflation is seen hitting an almost decade-high 5.2% and a surprise could trigger further bets on Bank of England rate hikes and renew the pound's rally.

  3. Investors continue to monitor signs of a slowing economic recovery, mounting inflationary pressure, record rises in COVID-19 cases and post-Brexit tensions over the Northern Ireland protocol. A talk of a leadership challenge to Prime Minister Boris Johnson also added to uncertainty.

  4. The support of $1.355 may keep the pair from further decline. If it breaks through, prices may drop to $1.351. The upper limit of $1.366 represents the resistance level.

GBPUSD