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Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.

EUR/USD and EUR/GBP rally on hawkish ECB, USD/JPY stabilises

Outlook on EUR/USD, EUR/GBP and USD/JPY amid ECB and FOMC member comments.

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EUR/USD rallies on weakening US economic data

EUR/USD’s rally from its early January low at $1.0484 low so far made a new nine-month high at $1.0927 as US home sales slid to a 12-year low in December and Federal reserve meeting (Fed) Governor Christopher Waller hinted at a less hawkish monetary policy amid a continued decline in inflation, pushing the US dollar basket to an eight-month low and benefitting the Euro.

The cross is fast approaching the late April 2022 high and the 50% retracement of the 2021 to 2022 descent at $1.0936 to $1.094, also helped by hawkish comments by European Central Bank (ECB) officials. Above this resistance area beckons the psychological $1.10 mark.

Immediate minor support can be spotted around the 12 January $1.0867 high and more significant support at last week’s $1.0766 low. While above it, the short- and medium-term uptrends remain intact.
The $1.0766 low, together with the mid- to late December highs at $1.0736 to $1.0715 is expected to offer good support, were it to be revisited. Further support can be found around the $1.0663 to $1.0658 16 to 28 December highs.

EUR/USD chart Source: IT-Finance.com
EUR/USD chart Source: IT-Finance.com

EUR/GBP rises on hawkish ECB comments

EUR/GBP is seen recovering from last week’s low at £0.8722 following comments by ECB governing council member Klaas Knot indicating that the central bank is set to raise interest rates by 50 basis points (bp) in both February and March.

Above the minor psychological £0.88 level minor resistance can be spotted at the £0.8828 November peak as well as the £0.8834 22 December high, above which sits more significant resistance between the December and current January highs at £0.8877 to £0.8897.

Support comes along the 55-day simple moving average (SMA) at £0.8732 and last week’s low at £0.8722. If slipped through, the 23 November high and 19 December low at £0.8701 to £0.8691 may be reached. Further down sits the 28 November high at £0.8676.

EUR/GBP chart Source: IT-Finance.com
EUR/GBP chart Source: IT-Finance.com

USD/JPY remains above its early January low

USD/JPY continues to trade above its early January low at ¥127.23 as the Bank of Japan (BoJ) held firm on its yield curve range and kept its interest rate at an extremely dovish -0.1% on Wednesday with another hot inflation reading on Friday supporting the case for tightening, however.

The currency pair looks short-term bid with Friday’s high at ¥130.61 being eyed ahead of the ¥131.32 to ¥131.58 October-to-January downtrend line and last week’s high. While this resistance area caps, the short-term downtrend remains intact.

The medium-term downtrend will stay intact while the late December and current January highs at ¥134.50 to ¥134.77 aren’t overcome on a daily chart closing basis.
Below the early January low at ¥127.23 lie the late April and May 2022 lows at ¥126.95 to ¥126.36.

USD/JPY chart Source: IT-Finance.com
USD/JPY chart Source: IT-Finance.com

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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