INTRADAY TECHNICAL ANALYSIS 8 OCTOBER (observation as of 05:40 UTC)
[EURUSD]
Important Levels to Watch for:
- Resistance line of 1.16207 and 1.16907.
- Support line of 1.15343 and 1.14643.
Commentary/ Reason:
The euro was flat at $1.15730, hovering a tad above its Wednesday’s low of $1.15294, its weakest level since July last year.
The dollar was underpinned as U.S. yields outpaced those in Germany. The yields on 10-year notes were trading up at 1.612%, soared amid bets the Federal Reserve will still proceed with a tapering of bond purchases in coming weeks.
The EUR/USD continues to stall at the 1.154 price level, as indecision and suggest that the sell-off has lost steam. A longer-term bearish bias is well-established and significant bullish conviction will be required to overcome the current long-term trajectory.
Turning to the economic data to be released this week, the number to note is the ZEW index of German economic sentiment due Tuesday. Also on the calendar are final figures for German inflation in September and Eurozone industrial production in August Wednesday, and Eurozone trade data for August Friday.
[USDCHF]
Important Levels to Watch for:
- Resistance line of 0.93045 and 0.93248.
- Support line of 0.92387 and 0.92184.
Commentary/ Reason:
The dollar advanced against the Swiss franc on Monday, rose 0.11% to 0.92813.
Rising bets for an early policy tightening by the Fed continue to act as a tailwind for the greenback and lend some support to the USD/CHF pair. Investors now seem convinced that the Fed would begin rolling back its massive pandemic-era stimulus as soon as November.
The risk-on impulse has undermined demand for the traditional safe-haven Swiss franc. The global risk sentiment witnessed a dramatic turnaround after Russian leaders reassured Europe on gas supplies, while China’s Evergrande concerns eased and the U.S. federal debt ceiling extension.
The USD/CHF rebounded from the support levels after several failed series of attempted breaks, as sellers lost momentum. Oscillations may now remain within the 0.925-0.930 price range and moves will be determined by buyers’ appetite.
[USDJPY]
Important Levels to Watch for Today:
- Resistance line of 112.744 and 113.331.
- Support line of 111.207 and 110.844.
Commentary/ Reason:
The Japanese yen traded at 112.686 per dollar, slipping to a level last seen in April 2019.
Rising Treasury yields lifted the dollar to a near-three-year peak against the Japanese yen. U.S. Treasury yields rose sharply since Friday, widening the spread between U.S. bonds and Japanese bonds, making the greenback a more attractive investment.
A soft U.S. payrolls figure on Friday also did little to alter market expectations that the U.S. Federal Reserve will announce it will start tapering its massive bond-buying next month.
A boost to Japan's Nikkei 225 on Monday also weighed on the yen.
The USD/JPY pair has broken a long-term resistance line at the 112.26 price level and the strong bullish move beyond this resistance zone signals strong appetite and potential for a long, protracted rally. However, momentum indicators have showed that the pair is approaching overbought conditions and that the rally may slow.
[GBPUSD]
Important Levels to Watch for:
- Resistance line of 1.36802 and 1.37287.
- Support line of 1.35232 and 1.34747.
Commentary/ Reason:
The British pound held firmer at $1.36450, extending its recovery from a nine-month low set late last month, on growing expectations that the Bank of England could raise interest rates to curb soaring inflation.
Fuel shortage problems and renewed Brexit concerns continue to weigh on the pound while the pair also remains cautious by the broad-based U.S. dollar strength, following the higher U.S. T-bonds yields.
The GBP/USD pair continues to stall, unable to break the 1.368 resistance line as buyers currently lack the appetite to drive a rally beyond the resistance level.
