INTRADAY TECHNICAL ANALYSIS 12 OCTOBER (observation as of 05:30 UTC)
[EURUSD]
Important Levels to Watch for:
- Resistance line of 1.16028 and 1.16436.
- Support line of 1.15212 and 1.14804.
Commentary/ Reason:
The euro was flat at $1.15572, stayed pinned near its lowest levels in a year.
The prospects for an early policy tightening, along with fears of a faster than expected rise in inflation pushed the yield on the benchmark 10-year U.S. bond beyond the 1.60%, highest since June, underpinning the greenback.
The EUR/USD has flattened at the current price level 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 0.92967 and 0.93134.
- Support line of 0.92425 and 0.92258.
Commentary/ Reason:
The dollar was flat against the Swiss franc on Tuesday, at 0.92781.
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 remain convinced that the Fed will begin rolling back its massive pandemic-era stimulus as soon as November.
Meanwhile, concern about stagflation kept a lid on the optimism and tempered investors' appetite for perceived riskier assets. This, in turn, could benefit the safe-haven Swiss franc and keep a lid on any meaningful upside for the USD/CHF pair, warranting caution for aggressive bullish traders amid absent relevant market moving-economic data.
The USD/CHF rebounded from the one-week low support level touched yesterday. Now, the pair is hovering in a limiting trading range. The sluggish price movement in today’s session suggests indecisiveness among traders. 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 113.769 and 114.265.
- Support line of 112.193 and 111.706.
Commentary/ Reason:
The yen was flat against the dollar on Tuesday, steadied after hit a fresh three-year low earlier on the day. It traded to 113.276 per dollar, lost more than 1.65% in four days.
The yen slumped as traders wagered surging energy prices would drive Japan's demand for dollars and as they doubled down on expectations U.S. rates will rise well ahead of its peers.
The yen is also sensitive to rising U.S. yields, since rates at home are anchored near zero. Benchmark 10-year Treasury yields extended gains on Tuesday and, at 1.6136%, are their highest since June. The Fed also expected to begin tightening policy by announcing a tapering of its massive bond-buying next month.
A slide in stocks also boosted the liquidity demand for the dollar.
The USD/JPY pair appears to be slowing mid-rally after strong bullish moves in yesterday’s trading took the pair over the 113-price line. This points to a well-established short-term uptrend and supports prospects for additional gains, though overbought RSI on hourly charts warrants some caution for bullish traders. While the well-established short-term uptrend and supports prospects for additional gains, overbought Indicators RSI warrants some caution for bullish traders.
[GBPUSD]
Important Levels to Watch for:
- Resistance line of 1.36725 and 1.37077.
- Support line of 1.35588 and 1.35237.
Commentary/ Reason:
Sterling rose to a two-week high of $1.36732 on Monday before easing back slightly to last change hands at $1.36030 on Tuesday.
The pound gained on growing expectations that the Bank of England could raise interest rates to curb soaring inflation. Two Bank of England officials moved to reinforce signals of an imminent rise in UK interest rates, with one telling households to brace for a “significantly earlier” increase than previously thought.
Brexit concerns continue to limit the GBP's gains. On Monday, Irish Minister for Foreign Affairs Simon Coveney said that the UK has been dismissing the proposals presented by the EU.
The pair also remains cautious by the broad-based U.S. dollar strength, following the higher U.S. bonds yields.
The GBP/USD pair continues to stall, failed to move beyond the 1.361 resistance line as selling pressure typically rises at this price zone, to rebound bearishly and settles around 1.3600.
