INTRADAY TECHNICAL ANALYSIS 6 OCTOBER (observation as of 05:55 UTC)
[EURUSD]
Important Levels to Watch for:
- Resistance line of 1.16393 and 1.16804.
- Support line of 1.15571 and 1.15160.
Commentary/ Reason:
The euro was pinned below $1.16 and last bought $1.15882, stayed near its 14-month low of $1.15625 it struck on Thursday last week.
The greenback has won support as investors brace for the Federal Reserve to begin tapering asset purchases this year and lay the ground for an exit from pandemic-era interest rate settings well before central banks peers in Europe and Japan.
Rising T-note yields also supported the dollar on Wednesday as the 10-year T-note yield rose above the 1.5%. The unexpectedly better U.S. Sep ISM nonmanufacturing index also lent support to the greenback.
In Europe, a market-based gauge of long-term euro zone inflation expectations surged to a new six-year high as rising crude and record gas prices fanned inflation fears.
Some support awaits at the 2021 trough of 1.155, and further down, 1.1516 awaits. Adding in uncertainty about the U.S. debt ceiling – two weeks to go until an unimaginable default on debt payments – and the slow pace of German coalition talks, and there is more room to the downside.
The temporary Monday’s high of 1.1639 is the first resistance line to watch, which then is followed by 1.1680.
[USDCHF]
Important Levels to Watch for:
- Resistance line of 0.93191 and 0.93675.
- Support line of 0.92223 and 0.91739.
Commentary/ Reason:
The dollar rose 0.17% against the Swiss franc, at 0.92920, inching away from the 1-week low recorded on Monday.
While the renewed China’s Evergrande fears, inflation concerns, and the U.S.-China political tension favours safe-haven Swiss franc, the greenback found firmer buying support amid heightened nerves about the global growth outlook and as traders awaited U.S. jobs data for a clue on the timing of Fed policy tightening.
The USD/CHF has rebounded from the 0.9222 support line as bullish dominance is confirmed, once again. The 0.931 resistance line remains in sight and has been an obstacle to the rally in recent trading.
[USDJPY]
Important Levels to Watch for Today:
- Resistance line of 111.742 and 112.019.
- Support line of 110.849 and 110.573.
Commentary/ Reason:
The Japanese yen traded at 111.730 per dollar, weaker than levels below 111.2 seen against the greenback yesterday.
Traders are positioning themselves ahead of Friday’s U.S. Non-Farm Payrolls report that could offer clues on the timing of a tapering of Federal Reserve stimulus and the start of interest rate hike.
Meanwhile, the outlook for the Japanese economy remains dismal with it showing no signs of moving toward the country’s 2% inflation mandate. The yen was under pressure on concern that new Japanese Prime Minister Kishida will push for additional stimulus measures to revive pandemic-stymied growth in Japan. Japanese Economy Minister Yamagiwa on Tuesday said that Japan’s economy remains in a severe state due to the pandemic and that the government will use macroeconomic measures to swiftly help the recovery.
The USD/JPY pair has climbed back to the 111.745 resistance line and a break appears to be underway. A pullback in recent trading saw the return of buyers in support. The next target is at the 112.0 resistance line.
[GBPUSD]
Important Levels to Watch for:
- Resistance line of 1.36847 and 1.37507.
- Support line of 1.35527 and 1.34867.
Commentary/ Reason:
Sterling has recovered some of last week's sharp selloff against the dollar, but the gains were capped through the Asia session, eased to $1.36069.
The pound momentum was lost by the reaction to the US’ better ISM Manufacturing PMI data, where it improved to 61.9 in September from 61.7 in August. A higher-than-expected reading could be taken as potentially positive for the U.S. dollar as the ISM measures the health of the economy from a business perspective.
While the sterling has mainly been holding onto its recovery, the renewed Brexit concerns, fuel supply issues and a broad rebound in the U.S. dollar however are weighing negatively. The dollar also strengthened after the yield of 10-year Treasuries settled above the psychologically important resistance level at 1.50%, which is bullish for the U.S. dollar.
On the monetary policy front, it is relatively balanced – with both the Federal Reserve and the Bank of England are set to tighten their policies.
The GBP/USD pair continues to recover yet bullish momentum appears to be waning. Smaller-bodied candles suggest that the rally may not continue, at least not at the same pace.
On the upside, the GBP/USD will face the resistance at near the 1.368 mark. And a successful test of this level will open the way to the test of the next resistance which is located at 1.3750.
On the other hand, a decline will test the support zone at the 1.355 level, with the further support level at 1.348.
