INTRADAY TECHNICAL ANALYSIS 12 JANUARY (observation as of 06:50 UTC)
[EURUSD]
Important Levels to Watch for:
- Resistance line of 1.13905 and 1.14151.
- Support line of 1.13109 and 1.12863.
Commentary/ Reason:
The euro stood at $1.13742, to record a new weekly top against the dollar. A climb above $1.1387 would take it to its highest since mid-November.
A lower T-note yields weakened the dollar’s interest rate differentials, while a rally in stocks on the day also reduced the liquidity demand for the dollar.
EUR/USD meanwhile climbed on strength in German bund yields. The 10-year German bund yield rose to a 2-1/2-year high Tuesday at -0.17%, strengthening the euro’s interest rate differentials.
Meanwhile, a Fed comments on Tuesday were hawkish for Fed policy and contained losses in the dollar.
The major currency pair remains on the buyer’s radar as they brace for the key US inflation data later today.
Some follow-through buying beyond the 1.139 mark could trigger a short-covering move and push spot prices to the next relevant resistance near the 1.141 region. On the flip side, the 1.131 region now seems to protect the immediate downside ahead of the 1.128 support zone.
[USDCHF]
Important Levels to Watch for:
- Resistance line of 0.93038 and 0.93413.
- Support line of 0.91827 and 0.91453.
Commentary/ Reason:
The dollar was flat on Tuesday, traded at 0.92337 franc, moving further down off the 3-week peak of 0.92776 it touched overnight.
The Swiss franc gained ground, supported by a pullback in Treasury yields, though the dollar still holds on to its broad gains, amid firming expectations of imminent rate hikes by the Fed.
Contrarily, the SNB has yet not signalled any policy tightening, as domestic inflation is still well below those of its main trading partners and should maintain negative interest rates through 2022.
Nevertheless, the USD/CHF is still upward biased, so the pullback on Tuesday’s trading session could be an opportunity for USD bulls to re-enter the. To the upside, the USD/CHF’s first ceiling would be at around 0.930, before challenging the last monthly peak of 0.93.
[USDJPY]
Important Levels to Watch for Today:
- Resistance line of 115.899 and 116.220.
- Support line of 114.860 and 114.538.
Commentary/ Reason:
Against the yen, the dollar recovered to 115.322, from a one-week low of 115.046 at the start of the week.
There was little move in the pair on buoyant risk on the day.
However, traders kept cautious sentiment ahead of this week’s US inflation numbers and Retail Sales, which may keep the US Treasury yields on the front foot, which in turn can keep the USD/JPY buyers hopeful.
The yen remained close to 5-year lows as monetary policy between Japan and other countries continued to diverge. While other central banks signalled readiness to normalize monetary settings, the BoJ is widely expected to maintain its ultra-loose policy as Japanese inflation remained well below the 2% central bank target.
The yen also is under pressure Tuesday after Japanese Prime Minister Kishida said Japan will extend border restrictions until the end of February, which will curb economic activity and growth.
[GBPUSD]
Important Levels to Watch for:
- Resistance line of 1.36563 and 1.36857.
- Support line of 1.35611 and 1.35317.
Commentary/ Reason:
Sterling rose to $1.36354 against the U.S. dollar on Wednesday, its highest since early November 2021.
The pound was strengthened as investors see Britain overcoming a wave of COVID-19 cases led by the Omicron variant and have priced in a nearly 80% chance of Bank of England rate hike in February.
Though remain cautious about the greenback over the possibility of a hike in the interest rate
Investors continue to monitor signs of a slowing economic recovery, mounting inflationary pressure, record rises in COVID-19 cases and post-Brexit tensions over the Northern Ireland protocol.
