EUR/USD, GBP/USD and USD/JPY might lose upside momentum
Outlook on EUR/USD, GBP/USD and USD/JPY ahead of this week’s European inflation and employment data.
EUR/USD loses upside momentum after three straight days of gains
EUR/USD’s recovery off last week’s 2,5 month low at $1.0766, made marginally below the 200-day simple moving average (SMA) at $1.0816, has so far taken it out of its downtrend channel to $1.0945 amid three straight days of gains as the greenback faltered.
Slightly higher-than-anticipated Spanish and German inflation has helped the euro to rise, probably forcing the European Central Bank (ECB) to stick to its monetary tightening path.
Today’s Eurozone consumer price inflation (CPI) is expected to come in 0.2% lower in August, both for the headline and core rate, compared to the previous month and together with German retail sales and unemployment data may give investors further clues as to the path of future monetary policy.
EUR/USD has the 55-day SMA at $1.0971 in its sights ahead of the minor psychological $1.10 mark. Potential slips may find support along the breached downtrend channel line at $1.088 and further down at the $1.0834 July low.
GBP/USD probes downtrend line
GBP/USD’s recovery off its 2,5 month low at $1.2549 has led to three consecutive days of gains for the currency pair on the back of a weakening greenback with the July-to-August downtrend line at $1.271 having been breached.
Ideally a daily chart close above it and rise above Wednesday’s high at $1.2746 would open the way for the bulls to reach the 55-day SMA at $1.278 and the 10 August high at $1.2819.
Good support can now be spotted between the late June low and early to mid-August lows at $1.2617 to $1.2591. While resistance at $1.2819 isn’t overcome, the medium-term trend remains bearish.
USD/JPY trades in low volatility near its ten-month high
USD/JPY’s spike to a new ten-month high at ¥147.37 on Tuesday as been followed by a minor retracement lower despite Japan industrial output dropping more than expected. Industrial production declined by 2% versus a forecast -1.4% and a final growth of 2.4% in the previous month.
What is interesting from a technical perspective is that this week’s price high has not been confirmed by the Relative Strength Index (RSI) which is making a lower high. This creates negative divergence which in the majority of cases tends to provoke at least a minor correction against the trend and sometimes acts as a precursor to a significant trend reversal.
A top in USD/JPY would be confirmed if the cross were to fall through and, on a daily chart basis, close below last week’s low at ¥144.54. In this case, the 55-day SMA at ¥143.04 would represent the next downside target. A continued advance and rise above ¥147.37 would put the psychological ¥150.00 region back on the cards.
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