INTRADAY TECHNICAL ANALYSIS 1 JULY (observation as of 08:30 UTC)
[EURUSD]
Important Levels to Watch for:
- Resistance line of 1.05319 and 1.05701.
- Support line of 1.04080 and 1.03697.
Commentary/ Reason:
The euro slipped 0.33% to $1.04495 on Friday, retreating after dollar weakness on Thursday saw it rally 0.31% to come off a two-week low at $1.03826.
For the week, the euro is heading down 0.34% with investors judging Europe's economic predicament to be more precarious than in the U.S., compounded by an energy crisis stoked by the war in Ukraine.
Recession fears are creeping into the thinking of ECB policymakers, even as they prepare for the bank's first interest rate increase in more than a decade to curb inflation. The ECB is expected to raise interest rates this month for the first time in a decade, although economists are divided on the magnitude of any hike.
Reuters reported Thursday that the ECB will on Friday begin a process of buying bonds from southern European nations, including Italy, Spain, Portugal and Greece. The ECB will reportedly use the proceeds from maturing German, French and Dutch debt, in a bid to cap spreads between their respective borrowing costs.
The fears of a global slowdown meanwhile burnished the greenback's appeal due to its haven status.
The EUR/USD pair provided negative trades yesterday to press on 1.040 barrier, before bounced upwards. The price begins today negatively, affected by stochastic negativity, which supports the continuation of the expected bearish trend scenario on the intraday basis, which its next main target located at 1.0408.
Bearish trend for the upcoming period will continue to be suggested unless the price rallied to breach 1.0531 and hold above it.
Markets will look to euro zone inflation data due later in the day for a better sense of how aggressive the ECB might be, along with manufacturing PMIs from Germany, France, Italy, and Spain.
[USDCHF]
Important Levels to Watch for:
- Resistance line of 0.96431 and 0.96853.
- Support line of 0.95065 and 0.94643.
Commentary/ Reason:
The dollar rose 0.35% to 0.95815 francs on Friday after bounced off the two-month low on Wednesday.
A rangebound trading in the week still put the pair for 0.3% losses for the week.
The Alpine currency, another beneficiary of safe haven flows still basking in the afterglow of the Swiss National Bank's surprise rate hike two weeks ago.
Sentiment is still dismal due to renewed fears that high inflation and a global economic slowdown are a stagflation scenario. U.S. equities are under pressure for their worst percentage fall since the 1970s.
The USD/CHF pair provided positive trades, however, the EMA50 formed solid resistance barrier against the price, to rebound bearishly. A negative motive will push the price to break towards our next target that reaches 0.9506.
Bearish trend is suggested for the upcoming period unless breaching 0.9643 and holding above it.
[USDJPY]
Important Levels to Watch for Today:
- Resistance line of 137.144 and 138.417.
- Support line of 135.598 and 133.325.
Commentary/ Reason:
The dollar bought 135.460 yen on Friday after a more than 10% rise over the June quarter. Mid-week, the yen dropped to a multi-decade low of 137.00 per dollar as the Fed's aggressive stance contrasted sharply with the Bank of Japan's steadfast dovishness.
Divergent central bank policies continue to pressure the yen, with the Fed, BoE, and ECB ending their QE programs and raising interest rates while the BoJ maintains its QE program and record low interest rates. The BoJ is able to keep interest rates pinned down because Japanese inflation is still low by global standards, though even small price rises are causing a messaging problem for the central bank.
Some market players have speculated the BoJ could adjust its easy policy to prevent the yen from falling further. But Governor Haruhiko Kuroda has brushed aside that possibility, arguing that the weak economy still needed monetary support. Japanese policymakers have traditionally favoured a weak yen over a strong one, as yen rises hurt exports by making Japan's goods less competitive overseas.
The USD/JPY pair opens today negatively to press on the bullish channel’s support line that appears on the chart, which hints heading to achieve new bearish correction, targeting testing 135.598 initially.
Bearish bias will be expected for today, taking into consideration that the consolidation of the current support against the negative pressure will stop the suggested negative scenario and lead the price to resume the bullish trend again.
[GBPUSD]
Important Levels to Watch for:
- Resistance line of 1.24003 and 1.25543.
- Support line of 1.20293 and 1.19383.
Commentary/ Reason:
Sterling dropped 0.48% to $.1.21155, reversing Thursday's climb. For the week, the pair has dropped 0.78%.
The British pound struggles for clear directions as it seesaws rangebound around two-week-long, likely to find it difficult to stage a convincing recovery in the near term.
On Wednesday, Bank of England Governor Andrew Bailey adopted a cautious tone while speaking at the European Central Bank's annual Forum on Central Banking. Bailey said that they were being hit by a "very large income shock." Regarding the policy outlook, Bailey noted that there will be circumstances that will require them to "do more" but added that they were not there yet in terms of the next meeting.
A reminder that at the most recent policy meeting, the BoE slightly toughened their forward guidance with regard to rate hikes, prompting markets to boost expectations of a 50bps rate rise.
Bailey's comments contrasted with FOMC Chairman Jerome Powell, who repeated that the US economy was strong enough to withstand higher interest rates.
Meanwhile, it's worth noting that Wall Street's main indexes remain on track to open deep in negative territory with US stock index futures losing more than 1% in the European session. In case safe-haven flows continue to dominate the financial markets in the American session, the dollar should be able to preserve its strength against its rivals.
The GBP/USD pair returns to decline now, noticing that stochastic provides negative overlapping signal now, waiting to motivate the price to provide more negative trades to attack 1.2029 and open the way to head towards our extended target at 1.1939.
Therefore, the bearish trend scenario will remain valid and active unless breaching 1.2400 and hold above it.
