INTRADAY TECHNICAL ANALYSIS 5 NOVEMBER (observation as of 06:15 UTC)
[EURUSD]
Important Levels to Watch for:
- Resistance line of 1.16542 and 1.16918.
- Support line of 1.15326 and 1.14950.
Commentary/ Reason:
The euro was flat at $1.15552, but stays close just above a three-week low touched yesterday.
Investors took a more balanced view of Fed monetary policy and the overall picture painted by fresh upbeat data for the U.S. services industry.
Bank of England's shock decision on Thursday to defer an interest rate hike hammered on the euro. Long-dated eurozone bond yields had been edging higher earlier but dipped with the BoE gyrations.
Bond yields dropped both in Britain and Europe with Germany's 10-year government bond yield, the benchmark for the eurozone, falling 6 basis points, to a one-month low of -0.23%.
The euro also remained under pressure against the dollar with the ECB seemingly far behind the Fed in tightening. ECB President Lagarde on Wednesday pushed back on market bets for a rate hike as soon as next October and said it was very unlikely such a move would occur in 2022.
The ECB is aware of people's fears about high inflation but is very unlikely to raise interest rates next year, ECB board member Isabel Schnabel said on Thursday.
The EUR/USD is once again testing the 1.153 support line which could indicate a break is imminent, especially considering the number of recent tests and the apparent lack of conviction from buyers.
[USDCHF]
Important Levels to Watch for:
- Resistance line of 0.91499 and 0.91714.
- Support line of 0.90805 and 0.90590.
Commentary/ Reason:
The Swiss franc traded slightly lower on Friday as the dollar extended gains, last traded at 0.91265.
As expected, the Fed announced it would trim its bond buying by $15 billion a month from this month, while leaving open the option to quicken or slow the pace as needed. Fed Chair Jerome Powell, however, did sound slightly less sure inflationary forces would prove to be fleeting, enough to hit longer-term bonds and "bear steepen" the yield curve.
The Swiss franc trying to build momentum on its safe-haven appeal. The risk-off impulse in the market today benefitted the safe-haven Swiss franc.
The USD/CHF pair has begun to climb, although bullish conviction remains low as denoted by the small-bodied candles in the current move. The trajectory suggests an end to the sell-off in recent trading, parted from the 0.908 support line which has acted as a strong support level for the pair.
The pair is headed for 0.28% losses for the week.
[USDJPY]
Important Levels to Watch for Today:
- Resistance line of 114.340 and 114.598.
- Support line of 113.506 and 113.248.
Commentary/ Reason:
The dollar kept within its opening against the yen on Friday, bought 113.672 yen, on track to a 0.20% weekly decline.
The USD/JPY slumps during the day, despite broad dollar strength across the board. Lower U.S. T-bond yields weighed on the pair, benefiting the Japanese yen.
The yen also was strengthened on the outlook for Japan to reopen its economy from pandemic restrictions after the Nikkei reported that the Japanese government is looking to restart the issuance of long-term business visas as part of an easing of pandemic border controls.
The USD/JPY has begun to pullback and may now float back towards the 113.50 and 113.24 support lines. The current trading range has remained intact since October, as there appears to be little appetite to drive price action.
[GBPUSD]
Important Levels to Watch for:
- Resistance line of 1.36954 and 1.37810.
- Support line of 1.34186 and 1.33330.
Commentary/ Reason:
The Bank of England kept interest rates on hold overnight, dashed investors' expectations who had been convinced that it would be the first of the world's big central banks to raise borrowing costs after the pandemic.
The BoE kept alive the prospect of a move soon, saying it would probably have to raise Bank Rate from its all-time low of 0.1% "over coming months" if the economy performed as expected.
Sterling sat just above its 11 weeks low at $1.34927, roughly in the bottom half of range it has traded since July.
Governor Andrew Bailey said two scheduled labour market data releases between now and the BoE's next rate decision on Dec 16 could clear up the uncertainty about the labour market but that was not "a strong clue" about when a hike might come.
The BoE's cautious approach came a day after the U.S. Fed said it would start scaling back its bond-buying programme this month, a precursor to its first rate increases which investors expect in mid-2022.
The greenback made solid strides against sterling, on track to 1.30% gains for the week.
