EUR/USD, EUR/GBP and USD/JPY consolidate as investors digest US Fed minutes
Outlook on EUR/USD, EUR/GBP and USD/JPY post hawkish Fed minutes.
EUR/USD bounce stalls post US Fed minutes
Wednesday’s US Federal Reserve (Fed) minutes showed that further increases in the federal funds rate are deemed to be appropriate and that a restrictive monetary policy should be maintained until inflation was on a sustained downward path to 2%, something which was likely to take some time. The minutes also showed that no policy member anticipated a reduction in the federal funds rate in 2023.
Wednesday’s bounce in the EUR/USD has thus given way to some minor consolidation around the $1.06 mark. While this week’s low at $1.052 underpins, the mid- to late December highs at $1.0715 to $1.0736 may well be revisited in the days to come but represent good resistance. Intraday support above the $1.052 low can be spotted around the 22 December $1.0574 low.
EUR/GBP breaks its recent fall
EUR/GBP recent sell-off from its end of December high at £0.8877, made marginally above its October peak at £0.8867, has found support at £0.8783 with the cross bouncing back towards the £0.8828 November peak ahead of the UK’s December Final Services purchasing managers index (PMI) data which is expected to come in unchanged at 50.00.
Above the £0.8828 November peak, the October and late December highs can be seen at £0.8867 to £0.8877. Only a rise and daily chart close above last week’s high at £0.8877 would put the minor psychological £0.90 region back on the plate. A currently unexpected slip through Tuesday and Wednesday’s lows at £0.8783 and the £0.8780 21 October high may lead to the 55-day simple moving average (SMA) at £0.8701 being back in focus.
USD/JPY recovers slightly as investors digest US Fed minutes
USD/JPY minor bounce off its ¥129.52 early January low is approaching its October-to-January downtrend line at ¥133.32 as investors digest the Fed’s hawkish minutes and as consumer confidence in Japan increased to 30.3 in December compared to its November 2 ½ year low at 28.6.
The currency pair will remain in a clearly defined downtrend, with lower highs and lower lows being seen on the daily chart, while it remains below its last reaction high at ¥134.50 and the mid-December low at ¥134.52. Below this area but above the four-month downtrend line lies the early December low at ¥133.63 which may also act as resistance. Potential slips on Thursday should find initial support at the ¥130.58 20 December low and then in the ¥130.00 region.
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