INTRADAY TECHNICAL ANALYSIS 31 MAY (observation as of 07:15 UTC)


Important Levels to Watch for:

-        Resistance line of 1.07770 and 1.08459.

-        Support line of 1.06392 and 1.05703.

Commentary/ Reason:

  1. The euro slipped 0.36% to $1.07371, gave back some of its recent gains on Tuesday, but was still set for a 2.4% gain in May, its best month in a year as markets reposition in anticipation of interest rate increases in Europe and the possibility of a slower pace of U.S. rate hikes.

  2. German inflation rose to 7.9% in April from March’s 7.4%, its highest level in nearly half a century in May on the back of soaring energy and food prices, strengthening the case for more aggressive rate rises from the ECB soon to bring down inflation, which is expected to start to raise rates in July for the first time since the pandemic began.

  3. Eurozone inflation data is due later Tuesday. The U.S. meanwhile will release consumer confidence data. This will be followed by the ISM Manufacturing PMI on Wednesday, the ADP report on Thursday and the closely watched monthly jobs report (NFP) on Friday.

  4. The dollar meanwhile was buoyed, as the benchmark U.S. 10-year Treasury yields leaped on Tuesday after bond markets in the U.S. were closed in the previous session for the Memorial Day holiday.

  5. Further rise is still in favour in EUR/USD with 1.0639 minor support intact. Sustained trading advancing beyond a bullish 20 SMA, to target 1.0777 resistance next. On the downside, however, break of 1.6391 minor support will turn bias back to the downside for retesting 1.0570 low instead.




Important Levels to Watch for:

-        Resistance line of 0.96499 and 0.96997.

-        Support line of 0.95503 and 0.95005.

Commentary/ Reason:

  1. The dollar rose 0.37% to 0.96021 on Tuesday, though heading for 1.5% monthly losses.

  2. The greenback rose against the Swiss franc, but a risk-on market mood keeps the greenback on the defensive.

  3. The USD/CHF appears to find its feet after dropping from YTD highs at 1.0000. For two consecutive days, the major has been trading within the 0.9573-0.9642 band, unable to break above/below the range, despite some US economic data, which investors ignored.

  4. The USD/CHF pair shows sideways trades since yesterday, to keep its stability below the resistance level, and keeping the correctional bearish trend valid, organized inside the bearish channel that appears on the chart, and the way is open to achieve our waited target at 0.9550, noting that breaking this level will extend the bearish wave to target 0.9500 as the next negative station.

  5. Bearish trend scenario will remain active unless breaching 0.9650 and holding above it.




Important Levels to Watch for Today:

-        Resistance line of 128.403 and 129.368.

-        Support line of 126.473 and 125.508.

Commentary/ Reason:                                        

  1. The yen was at 127.920 per dollar, softer on the day as it fell back 0.35% to one-week low but set for its strongest month since July last year.

  2. The USD/JPY edged higher for the second straight day, supported by a sharp spike in the US Treasury bond yields.

  3. The big divergence in the monetary policy stance adopted by the Fed and the Bank of Japan also acted as a tailwind for the pair.

  4. That said, a softer risk tone extended some support to the safe-haven Japanese yen. The overnight optimism led by the easing of COVID-19 restrictions in China remained capped amid doubts that central banks can hike interest rates to curb inflation without impacting economic growth.

  5. The worries also resurface following the release of official Chinese PMI prints for May, which showed that activity in both manufacturing and services sectors remained in contraction territory. This, along with concerns that the global supply chain disruption would continue to push consumer prices even higher, further weighed on investors' sentiment.

  6. Expectations that the Fed could pause the rate hike cycle later this year held back bulls from placing fresh bets around the USD/JPY pair.

  7. The intraday uptick of USD/JPY lifted spot prices beyond a resistance marked by the top end of over a three-week-old descending trend channel. The set-up seems tilted firmly in favour of bullish traders and supports prospects for additional gains.

  8. Momentum back above the daily swing high, around the 128.403 region, closely followed by the 129.368.

  9. Rise is expected in the upcoming sessions unless breaking 126.473 and hold below it. Some follow-through selling would negate any near-term positive bias and make the USD/JPY pair vulnerable. The downward trajectory could then drag spot prices towards testing the 125.508 support.




Important Levels to Watch for:

-        Resistance line of 1.26600 and 1.27290.

-        Support line of 1.25220 and 1.24530.

Commentary/ Reason:

  1. Sterling edged down 0.24% to $1.26146 on Tuesday.

  2. It however, still set for a monthly gain of 0.7% versus the dollar, its first monthly rise in 2022.

  3. The GBP/USD pair faces temporary negative pressure now to test the key support 1.2522, keeping its stability above it, while the EMA50 continuation to support the price from below, to continue suggesting the bullish trend for the upcoming period, for the next target that is located at 1.26600 and 1.27290.