INTRADAY TECHNICAL ANALYSIS 11 MAY (observation as of 05:00 UTC)
[EURUSD]
Important Levels to Watch for:
- Resistance line of 1.21804 and 1.22005.
- Support line of 1.21154 and 1.20953.
Commentary/ Reason:
The euro edged up 0.12% to $1.21436.
The dollar weighted as investors bet that rising inflation would erode the currency’s value as the U.S. Federal Reserve maintains its loose monetary policy.
Adding to the dollar bearish side, Chicago Fed President Evans said it would probably take "quite some time" for the Fed to conclude the economy has made substantial progress following last Friday's disappointing jobs report.
Market participants now awaited the release of Eurozone and Germany ZEW Economic Sentiment Index later today to predict an improvement in economic activity for the region, apart from the U.S. inflation data on Wednesday.
The EUR/USD has retraced from the 1.218 price level, once again, as sellers have returned, stifling the rally. Sentiment does appear to have turned bullish over the medium-term and the ascending trendline will form a support level. Momentum indicators have stalled in bullish territory, yet there is further upside potential.
[USDCHF]
Important Levels to Watch for:
- Resistance line of 0.90248 and 0.90390.
- Support line of 0.89790 and 0.89648.
Commentary/ Reason:
The dollar traded slightly higher against the Swiss franc on Monday, to trade at 0.90055.
Although traded higher, the dollar was weighted by the inflation worries, lower U.S. Treasury yields and expectations of reduction in the Fed’s stimulus.
Meanwhile asset tapering talks, and increased risk aversion following surging COVID-19 cases, lent support to the U.S. dollar.
[GBPUSD]
Important Levels to Watch for:
- Resistance line of 1.40576 and 1.40767.
- Support line of 1.39958 and 1.39767.
Commentary/ Reason:
The British pound bought $1.41257, which broke above the key $1.40 level for the first time in more than two months as investors cheered Britain’s progress in reopening its economy. UK PM Boris Johnson is expected to outline further plans to reopen the UK economy later today.
The pound jumped even as pro-independence parties in Scottish elections won a majority.
The greenback fell on the release as traders pushed back expectations of taper talk to the backend of the year. Investors now await inflation data from the U.S., including core CPI, that will be released on Wednesday. The data will gauge the level of inflationary pressure and could push Treasury yields up, potentially giving the greenback a boost, according to some investors.
The GBP/USD pair is testing a recent price ceiling at the 1.419 resistance level. On a previous occasion, price action retraced from this price level, resulting in a period of consolidation. Significant bullish conviction will be required to drive the break. Momentum indicators are bullish with RSI testing the overbought line.
