Bulls amassed positions around the support zones of 1.1760 and 1.1800 as sentiment remains positive – for a charge at the resistance level at 1.1892. If this zone is breached the rally might take off, with the first target being the resistance at 1.2010. Bulls can expect intraday support at around 1.1840, while the more substantial one can be found at 1.1800. The Dollar slid mainly due to concerns regarding rising COVID-19 cases and the gradual transition of power to president-elect Biden. Today, higher volatility can be expected around the announcement of the retail sales (13:30 GMT) and industrial production (14:15 GMT) data for the U.S.
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.
The currency pair is currently holding steady above the support of 1.1582, but the momentum of the bulls was not strong enough to test the resistance of 1.1640. Two scenarios are possible in the development of this complex pullback. In the first one, the failure of the bears to breach the 1.1528 support would make them look for better prices above 1.1582 and to fill in their ranks. In this case, a breach of 1.1528 would provoke a drop towards 1.1400. Given that the bulls are able to hold their positions and manage to attack 1.1640, they would heighten their chances for success and the next target for them would be the zone of 1.1670-1.1690. This week, the more significant news affecting the pair is the housing data for the United States on Tuesday at 12:30 GMT.
USDCHF forming a local correctional formation. The trading instrument demonstrates a local upward correction and is currently trading at 0.9216.
The Swiss currency remains under serious pressure. After the quarantine measures were seriously tightened in a number of European countries due to the gathering new wave of the pandemic, the country’s authorities also decided to tighten sanitary rules from December 20 to January 24. Now only vaccinated citizens or those who previously had COVID-19 will have access to restaurants, cultural institutions, sports, and entertainment centers.
The Swiss National Bank also pointed out a possible decline in economic indicators due to restrictions caused by the spread of the Omicron strain in its report on monetary policy. According to the regulator, the global economic recovery slowed down in Q3 2021, which led to an increase in consumer prices and a decrease in the activity of the industrial and service sectors. The new inflation forecast for the current year is 0.6%, with a gradual increase in 2022 to 1.0%.
The smooth growth of USD/CHF in the near future may be interrupted by the depreciation of the US dollar, which is under pressure due to the continued growth in the number of coronavirus cases in the United States. According to the New York state authorities, over the past day, another record of 23.4K cases was set; however, the holiday weekend is approaching, and during this period investors are trying to avoid active work on the stock exchange, which can lead to the preservation of the pair’s rate at current levels until the end of the week.
Support and resistance
On the daily chart of the asset, the price is trading within the global ascending channel, forming a local corrective formation. Technical indicators are in a state of uncertainty: the fluctuation range of the Alligator indicator EMAs have completely narrowed and the histogram of the AO oscillator approached the transition level as close as possible.
The unsuccessful test of the resistance level of 1.3575 was followed by a sharp decline and a breach of the main support and a local bottom of 1.3427. The expectations are for the dollar to continue rising and for the pair to attack the support level of 1.3350 that is coming from the higher time frames. In the positive direction, the aforementioned level of 1.3427 is now acting as a first resistance for the Cable.
USDJPY The dollar is actively losing value. Due to the weakening rate of the American currency, the USD/JPY pair corrects downwards, trading around the level of 114.47.
The Japanese currency is moving without pronounced dynamics amid a worsening epidemiological situation due to the rapid spread of the Omicron coronavirus strain. Over the past day in Tokyo, 21.5K, new infection cases were detected in the population, another record since the pandemic’s beginning. However, the country’s authorities have said that no emergency regime is planned, and although medical institutions have reported that hospital bed occupancy is already over 50%, the situation is under control. As for macroeconomic statistics, there are no reasons for positive either: the January PMI index in the services sector fell to 47.6 points from 52.1 points in December, and the indicator dynamics have remained negative since last autumn.
The US dollar index is falling, having reached local support of around 96.000. Investors were extremely disappointed by Nonfarm Payrolls, the outflow of which amounted to 301K with a projected increase of 207K workers. The indicator turned negative for the first time since January last year when a value of –78K. Today, data on jobless claims will be published, and the labor market expects a significant increase in new claims, which may negatively affect the dollar dynamics.
Support and resistance
The asset is being corrected within the global upward channel. Technical indicators are again in a state of uncertainty: fast EMAs on the Alligator indicator are preparing to cross the signal line downwards, and the AO oscillator histogram is again forming down bars.
The test of the support of 113.21 was unsuccessful as the dollar recovered some of its recent losses against the yen and, during the early hours of today`s trading, the pair is trading just below the resistance of 113.70. If the bears re-enter the market, a new and successful attempt at breaching the mentioned support could easily strengthen the negative expectations for the future path of the USD/JPY and lead to a decline towards the zone of 111.96. The first target for the bulls is the level of 113.70, followed by the resistance of 114.10.