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.
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/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.
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.
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