INTRADAY TECHNICAL ANALYSIS 12 MAY (observation as of 05:30 UTC)
[EURUSD]
Important Levels to Watch for:
- Resistance line of 1.21865 and 1.22097.
- Support line of 1.21115 and 1.20883.
Commentary/ Reason:
The euro slipped 0.17% to $1.21251 against the dollar.
A negative factor for EUR/USD came after Tuesday’s dovish comment from ECB Governing Council member Villeroy de Galhau who said that any talk about paring back bond purchases before the ECB's emergency bond program ends in March 2022 is "purely speculative."
The greenback meanwhile touched its weakest in 2-months against the euro overnight, following a strong European growth survey. The German May ZEW survey expectations index to a 21-1/4 year high of 84.4, stronger than expectations of 72.0.
The dollar also weighted as investors bet that rising inflation would erode the currency’s value as the U.S. Federal Reserve maintains its loose monetary policy.
The EUR/USD has failed to break the 1.218 resistance level, as a bullish momentum has begun to weaken. The resistance area has been a significant obstacle on several occasions in the past. Momentum indicators have stalled in bullish territory, yet there is further upside potential.
[USDCHF]
Important Levels to Watch for:
- Resistance line of 0.90535 and 0.90711.
- Support line of 0.89965 and 0.89789.
Commentary/ Reason:
The dollar traded higher against the Swiss franc on Wednesday, rose 0.22% to trade at 0.90537.
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.
Traders hung on to bets that the Federal Reserve would remain steadfast in its easy policy settings ahead of data expected to show a sharp rise in annual U.S. inflation.
[GBPUSD]
Important Levels to Watch for:
- Resistance line of 1.41742 and 1.41987.
- Support line of 1.40951 and 1.40707.
Commentary/ Reason:
Sterling gives up its recent gains to trade at $1.41215, down 0.12% on the day, though remaining above the key $1.40 level.
The dollar strengthened as Treasury yields pushed up, giving the greenback a boost.
Investors now await inflation data from the U.S., including core CPI, that will be released on Wednesday. The CPI report is forecast to show prices continued to increase in April.
Meanwhile for the UK, Bank of England Governor Andrew Bailey is scheduled to speak Wednesday, apart from the county GDP figures.
The GBP/USD pair is testing a recent price ceiling at the 1.413 resistance level, where price action has stalled. In the past, the pair has reverted from this level and price action has faded in a moderately bearish direction. Momentum indicators are bullish with RSI angling away from the overbought line.
