INTRADAY TECHNICAL ANALYSIS 1 OCTOBER (observation as of 06:00 UTC)
[EURUSD]
Important Levels to Watch for:
- Resistance line of 1.16116 and 1.17302.
- Support line of 1.15513 and 1.15326.
Commentary/ Reason:
The euro rose slightly on Friday to $1.15794 and on course to a 1.3% lower this week, tumbling through major support around $1.16 to touch its lowest levels since July 2020.
The greenback rode higher since early of the week on a "risk-off" mood. The dollar is mostly benefiting from the Fed’s upcoming announcement about tapering its purchase scheme. The prospects of the Fed buying fewer bonds triggered a sale of U.S. debt, resulting in higher yields. The increase of 10-year Treasuries to around 1.50% makes the dollar more attractive.
The recent surge in T-note yields is still supporting the dollar, along with central bank divergence, with the Fed expected to taper QE well before the ECB, BoE, or BoJ.
The greenback has taken a breather overnight, edging lower against the euro on a report that the U.S. Congress is set to approve government funding through December 3, averting an imminent shutdown.
From a short-term technical perspective, intraday bias in EUR/USD remains on the downside at this point. Immediate support awaits at 1.155, a level recorded a year ago. On the upside, above 1.161 minor resistance will turn intraday bias neutral and bring consolidations first.
[USDCHF]
Important Levels to Watch for:
- Resistance line of 0.93730 and 0.93982.
- Support line of 0.92914 and 0.92662.
Commentary/ Reason:
The dollar traded slightly higher against the Swiss franc, at 0.93204. USD/CHF edged higher for the seventh successive day on Friday amid the risk-on mood.
The greenback had gained strong positive traction over the past one week amid expectations that the Fed will begin rolling back its massive pandemic-era stimulus as soon as November. Adding to this, the markets also seem to have started pricing in the possibility of a Fed rate hike in 2022, which was evident from the recent upsurge in the U.S. Treasury bond yields.
However, the looming U.S. debt ceiling, along with the Swiss franc safe-haven appeal kept Swiss currency supported.
On a technical perspective, the overnight move beyond the previous monthly swing highs, adds credence to the constructive outlook for the USD/CHF pair. Hence, a subsequent strength beyond the 0.937 intermediate hurdle, towards reclaiming the 0.9400 round-figure mark, remains a distinct possibility.
On the downside, the pair to trade negatively and head towards potential test to 0.929 areas, making the bearish bias suggested in the upcoming sessions.
[USDJPY]
Important Levels to Watch for Today:
- Resistance line of 112.121 and 112.453.
- Support line of 111.047 and 110.715.
Commentary/ Reason:
The Japanese yen traded at 111.207 per dollar, stronger than levels around 112 seen against the greenback yesterday.
The yen is, however still down 0.6% for the week and twice as much in a fortnight as higher U.S. Treasury yields have drawn flows out of the Japanese yen into dollars. U.S. Treasury yields have surged on growing market expectations of U.S. tapering by year-end and rate hikes in 2022.
The dollar on Friday retreated from a 1-1/2 year high and posted moderate losses. The Japanese yen rebounded from yesterday losses and moved higher after a decline in stocks boosted the safe-haven demand for the yen.
The USDJPY pair is undergoing a reversal, as sellers returned with conviction in yesterday’s trading session, resulting in a break of the yesterday’s support line. Selling activity continues in today’s trading which may see the pair return to a previous range at the 111.04 and 110.715 support lines.
[GBPUSD]
Important Levels to Watch for:
- Resistance line of 1.35536 and 1.36090.
- Support line of 1.33744 and 1.33190.
Commentary/ Reason:
Sterling traded just above a 9-month low at $1.34531, down 0.15% on the day, and on course for 1.4% weekly losses.
Sterling underperformed, on worries about a hawkish sounding central bank despite growing supply chain problems. The pound also weighed on concerns about soaring natural gas prices and almost a week of petrol shortages in Britain.
Apart from the problems at the pump, the UK and France remain at odds over the fishing rights in the English Channel. The seemingly never-ending row over the Northern Irish protocol also keeps a lid on the pound.
The dollar remains as the main downside driver for the pound. US 10-year Treasury yields remain at elevated levels in response to the Fed's signal that it would taper its bond-buying scheme in the next meeting. Investors are selling U.S. debt ahead of the bank's reduction of such purchases, and the resulting higher yields make the greenback more attractive.
The GBP/USD has bounced from the lows, pushing the RSI outside overbought conditions. Support awaits at the fresh September low, followed by levels last seen late last year, at 1.3310. Immediate resistance is at above the daily high of 1.355, followed by the psychologically significant 1.36 line.
