The common European currency’s appreciation against the Greenback, which we observed in the past couple of days, was halted yesterday by the resistance at 1.1920. At the time of writing, the currency pair is looking to reach the support around the 1.1800 zone. If the support at 1.1800 holds, then the bullish sentiment would be retained and the EUR/USD should attempt another test of 1.1920, possibly followed by a test of the local high at 1.2010. Volatility could pick up after the announcement of the German ZEW economic sentiment at 10:00 GMT.
The logistical chaos and restrictions on mobility in the EU because of the new mutation of the virus continue to weigh heavily on the euro. This helped the bears prevail and the support zone at 1.2206 could not hold the negative impulse. The price dropped and headed for a test of the major target at 1.2161. A successful breach of the aforementioned zone would easily lead to future losses for the EUR against the USD and would pave the way to the lower support level at 1.2084. At the time of writing, the most probable scenario is for a retracement towards the level of 1.2206, which is now acting as a resistance. If the push is successful, we should see an attack of the upper target at 1.2268. Today, investors would be keeping an eye on the initial jobless claims data (13:30 GMT) and the new home sales data (15:00 GMT).
USDCHF Swiss economy shows signs of a slowdown. The USDCHF pair shows a downward trend, trading at 0.9181. The franc resists the growth of the dollar, although investors perceived the latest macroeconomic data from Switzerland as contradictory.
Thus, the national economy shows a slowdown: according to January data, quarterly GDP rose by 0.3% after increasing by 1.9% a month earlier. The negative dynamics were also reflected in the annual rate, which reached 3.7% instead of 3.8% a month earlier. Meanwhile, the index of leading economic indicators also lowered the Swiss Economic Institute (KOF): the February figure was 105.0 points against 107.5 points a month earlier. Strengthening of positions was demonstrated only by the January retail sales volume, which increased to 5.1% after falling by 0.5% in December.
The index of the US currency began to decline slowly after yesterday’s trading reached a yearly high of around 97.350. Investors fear that unprecedented economic sanctions against Russia could harm the global economy and provoke even more disruptions in the supply of raw materials and goods than they were during the peak of the incidence of the Delta strain of coronavirus. Today, February data on the state of the US manufacturing sector will be published. The business activity index may rise to 57.5 points from 55.5 points a month earlier.
Support and resistance
On the daily chart, the price moves within the global side channel, gradually approaching the support line. Technical indicators remain in a state of uncertainty: fast EMAs on the Alligator indicator is close to the signal line, and the AO oscillator histogram stays close to the transition level.
GBPUSD the UK is preparing for a possible lockdown
GBPUSD the UK is preparing for a possible lockdown. The British pound is showing a downtrend against the US dollar amid a serious deterioration in the spread of the Omicron strain in the UK. At the moment, the quotes of the trading instrument are in the area of 1.3225.
London Mayor Sadiq Khan declared a state of emergency amid an increase in the incidence of the new virus mutation (26K new cases of infection were recorded over the weekend, which is an absolute record since the beginning of the pandemic). The number of hospitalizations of citizens is also rapidly increasing, which entails a shortage of medical personnel and in the future may become a catalyst for the decision to introduce a new lockdown.
The reports of the authorities completely canceled out all the positive sentiment from the macroeconomic data, according to which the volume of Retail Sales in November added 1.4% after 1.1% recorded in October. The Core Retail Sales in annual terms also entered the growth zone and amounted to 2.7% after declining by 2.1% a month earlier, but these data were recorded before the spread of the Omicron strain, and in December, a serious correction of values may follow.
The American currency is trading at consistently high levels, having once again consolidated above 96 points in the USD Index. Investors continue to assess the impact on the markets of the rhetoric of the US Federal Reserve regarding changes in the course of monetary policy. The promise of the Chairman of the Fed Jerome Powell to raise the rate next year at least three times looks quite real, if the regulator manages to curtail the quantitative easing (QE) program in March. It is these expectations that will form a positive trend for the dollar in the near future.
Support and resistance
GBP/USD is trading within the global downtrend channel, remaining near the support line. Technical indicators maintain a sell signal: fast EMAs on the Alligator indicator are below the signal line, and the AO oscillator histogram is forming ascending bars trading deep in the sell zone.
Like most of the major currency pairs, the pound also lost ground against the U.S. dollar during last week. The bears lost momentum around the support zone of 1.3360, where the bulls intervened and tested the resistance of 1.3427. The current breach of the mentioned resistance cannot be considered as completed and, in case we do not receive confirmation, the most probable scenario would be for a second reduction and a test of the 1.3360 support area.
The bulls managed to limit the sales at the support level of 1.1835, after which the U.S. dollar lost ground against the single European currency and this led to a successful breach of the resistance at 1.1905. At the time of writing the analysis, the sentiment is still positive, for an appreciation of the euro against the dollar towards the next significant resistance at 1.2019. In the negative direction, the first important support zone for the currency pair remains the level at 1.1835. Today, investors will focus on the announcement of the data on the European Central Bank interest rate decision (12:45 GMT), as well as the data on the initial jobless claims for the U.S. (13:30 GMT).
The bulls entered the market and the sterling recovered some of its recent losses against the dollar. The currency pair breached the resistance zone of 1.3500, but the upward movement was limited by the resistance of 1.3575. The market sentiment remains negative and the pair would most probably head towards a test of support level of 1.3427.