INTRADAY TECHNICAL ANALYSIS 27 JANUARY (observation as of 07:00 UTC)
[EURUSD]
Important Levels to Watch for:
- Resistance line of 1.12792 and 1.13334.
- Support line of 1.12024 and 1.11798.
Commentary/ Reason:
The euro was weakened 0.22% to a six-week low of $1.12163.
Dollar strength weighed on the euro along with heightened geopolitical tensions in Ukraine.
The euro dipped against the dollar on buying support for the greenback following the Fed’s decision to hold its key interest rate near zero, while noted that the quantitative easing will end on schedule in March.
Dovish comments Wednesday from ECB Governing Council member Simkus meanwhile was bearish for EUR/USD when he said the ECB has no need to fundamentally change its assessment of the inflation outlook or accelerate policy tightening.
The EUR/USD pair remained under selling pressure through the first half of the day, trading below the 1.1300 level for most of the day. The EURUSD has begun to move rapidly towards the 1.120 support line which has held price action of a previous occasion. The question is do sellers have the appetite to drive the break? Fundamental factors will have more of an impact than any technical support. Technical indicators head lower with uneven strength within negative levels, with the RSI at oversold readings.
[USDCHF]
Important Levels to Watch for:
- Resistance line of 0.92670 and 0.92981.
- Support line of 0.91665 and 0.91355.
Commentary/ Reason:
The dollar hit 3-week highs against the Swiss franc on Thursday, bolstered after Federal Reserve chair Jerome Powell primed investors for U.S. rate hikes beginning in March.
The greenback rose 0.18% to trade around 0.92468 franc.
The dollar extended its Wednesday gains after a hawkish comment from Fed Chair Powell pushed T-note yields higher.
Positive risk sentiment weighs on the Swiss franc, boosting the greenback, despite Ukraine and Russian tensions not easing.
The USD/CHF has moved to test the recent high of around 0.9267 as buyers returned after last night’s FOMC meeting. Bullish conviction has been rising recently, yet the trendline represents a strong resistance area for the pair where, typically, bearish pullbacks take place.
[USDJPY]
Important Levels to Watch for Today:
- Resistance line of 115.021 and 115.404.
- Support line of 113.781 and 113.398.
Commentary/ Reason:
The dollar was marginally changed against the Japanese yen on Thursday, traded at 114.712 yen, though hovering at 3-weeks high leapt overnight.
The dollar jumps against the yen in the wake of the Fed's decision and Powell's remarks, its steepest daily jump in more than two months as the prospect of imminent hikes spooked stock markets and drove bond yields higher.
Higher T-note yields today undercut the yen and pushed USD/JPY higher.
While central bank divergence remains bearish for the yen, with the Fed signalling it will soon raise interest rates while the BoJ maintains its QE program and record-low interest rates.
[GBPUSD]
Important Levels to Watch for:
- Resistance line of 1.35290 and 1.35607.
- Support line of 1.34264 and 1.33947.
Commentary/ Reason:
Sterling slipped 0.23% against the dollar on Thursday, traded at $1.34283 as it is approaching the 1-month low of $1.34085 recorded on December 29 last year.
The dollar was bolstered after Federal Reserve chair Jerome Powell primed investors for U.S. rate hikes beginning in March.
The uncertainty over the rising geopolitical tensions also kept safe haven dollar supported. A volatile movement occurred as geopolitical risks were escalating in eastern Europe.
Investors now await a Bank of England meeting next week, holding on speculation of a rapid cycle of tightening for monetary policy. The BoE officials have largely decided to keep quiet in the run-up to February's crunch meeting, allowing expectations to solidify for another interest rate increase.
Investors also have an eye on the turmoil enveloping Prime Minister Boris Johnson, who is under pressure after attending parties during lockdowns.
The GBP/USD pair continues to descend towards the support level which represent the lower bound of the current trading range and where the previous rally was formed.
