EUR/USD rises and USD/JPY slips on Powell’s dovish tone while EUR/GBP drops
Outlook on EUR/USD, USD/JPY and EUR/GBP post Fed Chair’s speech and plunge in German retail sales.
EUR/USD extends rally after Powell speech
EUR/USD has made up most of this week’s losses following a speech by the Chair of the US Federal Reserve (Fed) Jerome Powell in which he suggested that smaller rate rises may start in December whilst warning that the fight with inflation isn’t over.
The US dollar’s weakness is the euro’s gain with the cross approaching its $1.0481 to $1.0496 November peaks, a rise above which may engage key resistance between the $1.0615 late June high and the $1.0638 March 2020 Covid-19 pandemic low.
The currency pair is supported by the 200-day simple moving average (SMA) at $1.0372 and will remain in a technical uptrend on the daily chart while it stays above Wednesday’s $1.0291 low on a daily chart closing basis.
EUR/GBP slips on German retail sales plunge
EUR/GBP is reversing its Monday gains and seen heading back down towards its mid- to late October lows at £0.858 to £0.8572 amid much weaker than expected German retail sales figures for October. These sank by 2.8% month-on-month (MoM), the biggest decline to date this year and much worse than the market forecast of a 0.6% fall.
Immediate resistance can be found along the two-month downtrend line at £0.8647 and also at this week’s highs at £0.8661 to £0.8675. While these cap, the November-to-December slide remains intact.
Since the £0.858 to £0.8572 zone represents significant support, it is expected to hold. Were this not to be the case, the 200-day SMA at £0.8539 would be in focus.
USD/JPY drops to three-month low
USD/JPY continues to slide amid a weaker greenback following Jerome Powell’s comments regarding a slower pace of rate hikes being envisaged by the Fed to combat persistently high inflation.
The fall through the ¥137.68 mid-November low put the early August high at ¥135.58 on the map. Further down meanders the 200-day SMA at ¥134.44.
Minor resistance above the ¥137.68 mid-November low comes in at Thursday’s ¥139.89 high. While the cross remains below it, the October-to-December downtrend remains intact with the 200-day SMA at ¥134.44 being in focus.
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