INTRADAY TECHNICAL ANALYSIS 19 MAY (observation as of 08:05 UTC)
[EURUSD]
Important Levels to Watch for:
- Resistance line of 1.05898 and 1.06383.
- Support line of 1.04327 and 1.03841.
Commentary/ Reason:
The euro recovered some ground, adding 0.30% to $1.04917 on Thursday after Wednesday's 0.85% slump.
Euro rose as investors pricing in the chance of an aggressive near-term tightening path by the European Central Bank. Money markets are currently pricing in 106-bps of ECB rate hikes from around 95 bps on Tuesday before ECB official Klaas Knot signalled a 50-bps rate increase was possible in July.
The safe-haven dollar huge overnight advance meanwhile was eased amid signs of an easing in Shanghai's coronavirus lockdown, although sentiment remained fragile as global equities sold off. The risk-on mood was lifted in a market that was badly bruised on Wednesday by mounting concerns of aggressive tightening by the Federal Reserve and other global central banks could choke growth.
Poor U.S. housing data on Wednesday also added to slowdown concerns as the U.S. Apr housing starts fell more than expected, and Fed Chair Jerome Powell had ratcheted up the hawkish rhetoric the previous day by saying the U.S. monetary authority would push interest rates as high as needed to stem a surge in inflation.
The EUR/USD pair shows some slight bullish bias, affected by stochastic positivity, waiting to get negative momentum that assist to push the price to break the support level that reaches 1.0432. In general, bearish trend is suggested for the upcoming period unless the price rallied to breach 1.0589 and hold above it.
[USDCHF]
Important Levels to Watch for:
- Resistance line of 0.99828 and 1.00304.
- Support line of 0.98288 and 0.97812.
Commentary/ Reason:
The Swiss franc continued to strengthen, with the dollar losing a further 0.16% to 0.98579 to the franc, following a 0.6% slide overnight.
The oversold RSI line challenges the quote’s further declines, suggesting a corrective pullback. In a case where USD/CHF remains firmer past 1.000, the monthly high of around 1.0030 will lure the bulls.
On the contrary, an early of the monthly low of 0.98288 and 0.97812 will be on the downside of the USD/CHF prices.
[USDJPY]
Important Levels to Watch for Today:
- Resistance line of 129.560 and 130.142.
- Support line of 127.675 and 127.092.
Commentary/ Reason:
The dollar slipped, with the yen adding 0.10% to 128.097 dollar after added 0.86% on Wednesday.
The yen was supported amid signs of an easing in Shanghai's coronavirus lockdown, although sentiment remained fragile as global equities sold off. China aims to reopen businesses in the next two weeks as it achieved zero-Covid status across its districts.
However, a higher U.S. T-yields put a slight resistance to yen recovery, as the Japanese currency is very sensitive to higher rates in the United States. This, along with the Fed-BoJ policy divergence, supports prospects for the emergence of some dip-buying around the USD/JPY pair.
As long as the BoJ continues to fight interest rates rising, it is essentially going to be a situation where the Japanese yen will continue to get hammered, especially with the Federal Reserve on the other side of this trade tightening monetary policy.
The BoJ doubled down on its massive stimulus program and reinforced a commitment to its super-low yield policy in April, saying it will offer to buy unlimited amounts of 10-year government bonds to defend an implicit 0.25% yield cap around its zero target every market day.
The downward trajectory could further get extended back towards testing last week's swing low, around the mid-127.00s. Failure to defend the latter should pave the way for a further near-term depreciation and drag spot prices to the next relevant support, around the 127.00 zone.
On the flip side, the 129.560 mark seems to cap the immediate upside. Some follow-through buying beyond the 130.00 psychological mark will reaffirm the bullish outlook and lift the USD/JPY pair to the 130.142 supply zone.
[GBPUSD]
Important Levels to Watch for:
- Resistance line of 1.25472 and 1.26163.
- Support line of 1.23235 and 1.22543.
Commentary/ Reason:
Sterling added 0.30% on Thursday, trading at $1.23775 after dropping 1.21% overnight as a surge in U.K. inflation to a 40-year record fostered worries for a sharp economic slowdown.
Traders remain anxious and speculated that the Bank of England will struggle to rein in inflation and avoid a recession.
On top of that, the potential negative impact of the ongoing Russia-Ukraine conflict on the UK economy, renewed Brexit concerns also make it difficult for GBP/USD to go into a steady recovery in the near term.
