INTRADAY TECHNICAL ANALYSIS 6 JULY (observation as of 08:15 UTC)
[EURUSD]
Important Levels to Watch for:
- Resistance line of 1.04479 and 1.05294.
- Support line of 1.01840 and 1.01024.
Commentary/ Reason:
The euro was at $1.02579, only a fraction above its overnight low of $1.02349, its weakest in 20 years.
The single currency lost 1.5% on Tuesday, its biggest fall since COVID-19 ravaged markets in March 2020.
The euro has lost 10% versus the dollar this year and is close to the psychologically crucial parity point it last saw in mid-2002.
The euro getting trampled as the prospect of a less aggressive hiking cycle by the ECB added to conviction the common currency will tumble to parity with the greenback.
The ECB is widely expected to start hiking rates this month, its first increase since 2011. Though, money markets have scaled back aggressive rate hike bets on the soaring energy prices and lower than expected PMIs in the region.
Higher gas prices and political uncertainty renewed recession fears and sent investors scrambling to the safe-haven currency. The euro is seen as particularly vulnerable given Germany, Italy and others' heavy dependence on Russian gas, and fears that sizeable ECB rate hikes could reignite another euro zone debt crisis.
A spike in bond yields is further stoking recession risks. European government borrowing costs have risen faster in the past fortnight compared with the U.S., indicating a quicker tightening of financial conditions.
The EUR/USD pair settles around 1.025 level after the strong decline that it witnessed yesterday, falling under continuous negative pressure coming by the EMA50, to suggest the continuation of the bearish bias in the upcoming sessions and heading to achieve more decline that targets 1.0184 as a next main station.
Bearish trend scenario will remain suggested on the intraday and short term basis, taking into consideration that breaching 1.0447 will stop the negative pressure and lead the price to start new recovery attempts.
Selling could follow if Eurozone retail sales figures due at 0900 GMT disappoint expectations for a 0.4% monthly rise in May. Investors also awaiting the release of ADP non-farm employment change data to gauge the state of the U.S. labour market. The final and most important data will come out on Friday with the release of non-farm payroll data.
[USDCHF]
Important Levels to Watch for:
- Resistance line of 0.97291 and 0.97717.
- Support line of 0.95911 and 0.95485.
Commentary/ Reason:
The dollar is advancing slightly on Wednesday session, trading at 0.96883 franc and staying afloat just below the 3-week high mark recorded yesterday.
The Swiss franc weakened against the greenback, despite safe-haven flows.
Investors’ fears that the global economy might enter a recession sent U.S. equities sliding. The U.S. Treasury yields followed suit, sliding, led by the U.S. 10-year Treasury yield descending. Meanwhile, the U.S. Dollar Index is rallying above 106.64, a tailwind for the pair.
The USD/CHF pair stop the recently suggested negative scenario and head to achieve expected gains in the upcoming sessions, targeting testing 0.9729 initially, noting that breaching this level will push the price to 0.9771 as a next main target.
Bullish bias will be suggested in the upcoming sessions, noting that the continuation of the bullish wave requires holding above 0.9591.
[USDJPY]
Important Levels to Watch for Today:
- Resistance line of 137.144 and 138.417.
- Support line of 134.598 and 133.325.
Commentary/ Reason:
The yen rose about 0.4% to 135.470 per dollar on Wednesday, as a safety bid has even returned to the beaten-down Japanese yen.
Traders sought out this safe haven in the face of renewed recession fears, soaring gas prices, and political uncertainty in the U.K.
The release of the minutes from the last Federal Reserve meeting will be of particular interest later in the session, with this get-together resulting in the U.S. central bank raising interest rates by 75 basis points, its largest hike since 1994.
The USD/JPY pair couldn’t manage to hold for long time above the bullish channel’s support line, to break it and settle below it again, which puts the price under the correctional bearish pressure, targeting testing 134.598 initially, noting that breaking this level will extend the bearish wave to reach 133.325 as a next station, unless breaching 137.144 and holding above it.
[GBPUSD]
Important Levels to Watch for:
- Resistance line of 1.21320 and 1.22056.
- Support line of 1.18514 and 1.17647.
Commentary/ Reason:
The British pound rose 0.34% at $1.19822, after slumped 1.20% overnight to a two-year low.
Sterling was pinned by the latest political crisis to hit UK Prime Minister Boris Johnson's government. Prime Minister Boris Johnson's premiership tottered on the brink after the resignations of two senior UK Cabinet ministers — finance minister Rishi Sunak and health secretary Sajid Javid — over his leadership. A change in leader, or speculation about it, could lend support but it is weighed heavily by an economic outlook that a new leader is unlikely to shift.
Brexit-related political jitters also make it difficult for the British pound to find demand. Over the weekend, foreign ministers of Germany and Ireland said in a joint statement that the UK was breaking an international agreement. Ministers noted that there was no legal or political justification for the UK to unilaterally change the terms of the Northern Ireland Protocol and argued that the British government chose not to act in good faith.
The greenback meanwhile continued to strengthen its appeal as a safe-haven currency amid the risk-off sentiment surrounding the market.
