EUR/USD and EUR/GBP benefit while USD/JPY takes a hit from change in U.S. inflation expectations
The euro has made gains against the dollar and sterling, while USD/JPY has fallen back.
EUR/USD stabilises thanks to a change in inflation expectations
While a more hawkish Federal Reserve (Fed) rate hike path still looks probable, the Euro seems to be benefiting from an outsized move in inflation expectations.
Yesterday EUR/USD dropped to but then bounced off the one-month support line. Today it is expected to range trade between it, the late December low and the November-to-December channel support line at $1.129 to $1.1272 on the one hand and last week’s high at $1.1365 on the other hand.
The cross is currently heading towards minor resistance which sits between the mid-December and 29 December highs at $1.136 to $1.1369. Key resistance remains to be seen between the late November and December peaks at $1.1382 to $1.1386. While the cross stays below it, the one-year downtrend remains in play.
EUR/GBP continues to hover above the £0.8335 to £0.8332 support zone
EUR/GBP has so far managed to hold above this year’s lows to date at £0.8335 to £0.8332, a fall through which would push the December 2016, April 2017, December 2019 and February 2020 lows at £0.8313 to £0.8277 to the fore, though. This area represents key long-term support which is expected to underpin the cross when first revisited.
While the £0.8335 to £0.8332 area continues to offer support, resistance along the one-month downtrend line at £0.835 is to be retested and, if broken through, the October and late December lows and last few days intraday highs at £0.8365 to £0.8381 as well.
While the next higher early January high at £0.8418 isn’t overcome, the downtrend (in place since September of last year), remains intact.
USD/JPY remains on the back foot
USD/JPY continues to come off its early January four-year high at ¥116.35 and slides towards minor support seen between the mid-November high and this year’s low to date at ¥114.97 to ¥114.95.
A tumble through the ¥114.95 low would likely provoke a deeper sell-off towards the mid-December high at ¥114.27. On the way down minor support can be spotted at the ¥114.70 October high and at the ¥114.44 early November high.
Immediate downside pressure should be maintained while the currency pair stays below yesterday’s high at ¥115.85.
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