INTRADAY TECHNICAL ANALYSIS 28 JANUARY (observation as of 07:10 UTC)

[EURUSD]

Important Levels to Watch for:

-        Resistance line of 1.12426 and 1.12859.

-        Support line of 1.11025 and 1.10591.

Commentary/ Reason:

  1. The euro was flat on Friday to trade at $1.11513, hovering just above the 20-month low of $1.11320 recorded overnight.

  2. The pair is heading for its worst week in seven months after collapsed through key levels overnight as traders priced in a year of aggressive U.S. interest rate hikes. The euro was headed for 1.8% weekly losses against the dollar.

  3. Dollar was supported on carry-over support from Wednesday when Fed Chair Powell unleashed bets on five or more hikes this year after he left the door open to rates rising faster than in previous cycles.

  4. Stronger-than-expected U.S. economic data also add support for the dollar.

  5. EUR/USD sinks to the mid-1.110s, area last visited back in June 2020, on the back of the relentless move higher in the US dollar. Further downside appears likely considering the ongoing price action. The pair could face additional bearish pressure at the round levels at 1.112 and at May 2020 low around 1.06. The bearish bias should stay intact unless the pair reclaims resistance line.

EURUSD

 

[USDCHF]

Important Levels to Watch for:

-        Resistance line of 0.93587 and 0.93991.

-        Support line of 0.92279 and 0.911875.

Commentary/ Reason:

  1. The dollar eased slightly against the Swiss franc, traded at 0.92981 franc on Friday. Though still elevated on gains accumulated since early of the week. The pair is headed for 2.2% weekly gains.

  2. The greenback on Friday soars on firmer buying support, backed by better U.S. economic and employment data, as well as investors prepared for future rate hikes from the Federal Reserve.

  3. FOMC Chairman Jerome Powell's hawkish remarks lifted US Treasury bond yields late Wednesday and allowed the dollar to extend strength.

  4. A risk-on market mood dented the prospects of the Swiss franc, which usually rallies on risk aversion. The safe haven currency slips despite the Ukraine and Russian tensions.

  5. The USD/CHF continues to blast towards the 0.935 ceiling as long-bodied candles reflect strong bullish support in the pair. Sellers appear to remain active and are providing some deceleration in price action. Momentum indicators are bullish with some marginal upside potential. 

USDCHF

 

[USDJPY]

Important Levels to Watch for Today:

-        Resistance line of 115.738 and 116.139.

-        Support line of 114.440 and 114.039.

Commentary/ Reason:                                        

  1. Moves in the pair were modest on Friday, leaving the yen at 115.450 per dollar.

  2. The dollar was headed for 1.5% weekly gains against the Japanese yen, driven higher by a flight from risky assets and markets pricing a year ahead of aggressive hikes in U.S. interest rates.

  3. The IMF urged Japan on Friday to scale back emergency pandemic support and consider raising taxes on property and capital income once the economy's recovery from the coronavirus pandemic-induced doldrums is firmly in place. On monetary policy, the IMF urged the BoJ to maintain its massive stimulus programme and stand ready to cut interest rates if inflation momentum remains weak.

  4. Central bank divergence remains bearish for the yen, with the Fed signalling it will soon raise interest rates while the BoJ maintains its QE program and record-low interest rates.

  5. The USD/JPY pair moved to test the 115.73 resistance line. Buyers appear to have found support and if a break materialises another test of the 116.13 ceiling could be on the cards. Momentum indicators have upward trajectories.

USDJPY

 

[GBPUSD]

Important Levels to Watch for:

-        Resistance line of 1.34719 and 1.35143.

-        Support line of 1.33347 and 1.32923.

Commentary/ Reason:

  1. Sterling was pushed to a five-week low of $1.33581 overnight and hovered at $1.33986 on Friday as traders turn their focus to a Bank of England meeting next week.

  2. Investors now await a Bank of England meeting next week, holding on speculation of a rapid cycle of tightening for monetary policy. The BoE officials have largely decided to keep quiet in the run-up to February's crunch meeting, allowing expectations to solidify for another interest rate increase.

  3. The pair is en route to end the week with 1.2% weekly loss.

  4. The dollar was bolstered after Federal Reserve chair Jerome Powell primed investors for U.S. rate hikes beginning in March. The uncertainty over the rising geopolitical tensions in eastern Europe also kept safe haven dollar supported.

GBPUSD