INTRADAY TECHNICAL ANALYSIS 20 JANUARY (observation as of 06:15 UTC)
[EURUSD]
Important Levels to Watch for:
- Resistance line of 1.14215 and 1.14629.
- Support line of 1.12873 and 1.12459.
Commentary/ Reason:
The euro continued to edge higher to $1.13485, gradually regaining some ground after having its worst day in a month on Tuesday, when the dollar caught a lift from a jump in U.S. Treasury yields.
EUR/USD posted moderate gains on strength in European government bond yields after 10-year German bund yield broke to a 2-1/2 year high of 0.022%, which benefits the euro’s interest rate differentials, while the T-note yields retreated lower.
The rise above 0% for the bund — the eurozone's benchmark — marks a turning point for regional debt, reflecting record-high inflation that is being exacerbated by supply chain disruption.
Also, hawkish comments Wednesday from ECB Governing Council member and Bank of France Governor Villeroy de Galhau lifted the euro when he said, "if inflation turned out to be more persistent, have no doubt the ECB will have the resolve and the capacity to quickly adapt our monetary policy."
The EUR/USD has staged a modest recovery, but the pair could find it difficult to continue to edge higher in the near term. Typically, attempts at this resistance area have resulted in pullbacks in price action. Bullish conviction currently appears insufficient to drive a break.
[USDCHF]
Important Levels to Watch for:
- Resistance line of 0.91917 and 0.92124.
- Support line of 0.91247 and 0.91040.
Commentary/ Reason:
The dollar slipped slightly against the Swiss franc to trade at 0.91545 franc on Thursday..
While the dollar was supported from a high T-note yields, the moves in the stocks market unsettled equity investors, underpinning the Swiss franc as a safe-haven currency.
The USD/CHF has failed to gather enough support to drive a rally in further confirmation that longer-term, a bearish bias still holds. The USD/CHF pair crawls downwards to approach 0.9124 level, waiting for more decline to break this level and confirm the continuation of the negative scenario for the upcoming period, while its next main target located at 0.9104.
[USDJPY]
Important Levels to Watch for Today:
- Resistance line of 115.315 and 115.953
- Support line of 114.039 and 113.401
Commentary/ Reason:
The dollar was last up 0.15% against the Japanese yen at $114.480.
USD/JPY on rose moderately on Thursday after gains in Japan’s Nikkei Stock Index today limited some safe-haven demand for the yen.
The yen also was weighed after policymakers have been wary of risks from the rapidly spreading Omicron variant as Japan recorded its largest daily COVID-19 infections on Tuesday.
Meanwhile, a lower T-note yields on Thursday were supportive of the yen. With market participants back on yield watch, the US 10-yr the subsequent pullback supported the Japanese yen.
The USD/JPY pair has failed to find the support to drive a rally. Given the rise in selling pressure in, we may now see another test of the trendline. Momentum indicators have flattened in neutral/bullish territory.
[GBPUSD]
Important Levels to Watch for:
- Resistance line of 1.36669 and 1.37017.
- Support line of 1.35544 and 1.35197.
Commentary/ Reason:
The pound rebounded to trade higher versus the U.S. dollar on Thursday, as the greenback retreated amid risk-on mode in the equity market.
Sterling was last at $1.36215, down 0.46% on the week on the stronger dollar, but up about 0.70% this month.
The British pound extends rally after Britain’s inflation rate on Wednesday surged unexpectedly to the highest since 1992, sharpening a squeeze on households and adding to pressure on the government and Bank of England to respond.
The strength of inflation is fanning speculation of a rapid cycle of tightening for monetary policy.
Investors kept monitoring signs of a slowing economic recovery, mounting inflationary pressure, record rises in COVID-19 cases and post-Brexit tensions over the Northern Ireland protocol. A talk of a leadership challenge to Prime Minister Boris Johnson also added to uncertainty.
