The bears managed to enter the market after the bulls failed to overcome the resistance at 1.3309. At the time of writing, the currency pair is testing the support zone at 1.3225, and it is possible to witness a deeper sell-off if the U.S. dollar manages to gain momentum. The next more significant support for the Cable is found at 1.3170, followed by the one at 1.3117.
USDJPY correction before further growth. After reaching the level of 116.10, the USD/JPY pair went into a correction to get more profitable entry points for buy positions, however, the positions of the American currency at the moment look more attractive for investment than the yen. Quotations are supported by positive macroeconomic statistics from the US. Thus, the Core PPI for January rose by 0.8%, although analysts had expected a figure of 0.5%. PPI for January added 1.0%, which exceeded the market’s preliminary estimates twice.
St. Louis Fed Chairman James Bullard’s comments added confidence to US dollar buyers. In an interview with CNBC on Monday, he reaffirmed his view that the US Federal Reserve is likely to raise interest rates by 100 basis points over the next three meetings. According to the official, the last four reports on inflation have reflected its significant acceleration and justified decisive action by the country’s financial authorities by July 1.
Meanwhile, a negative trend has emerged in the Japanese economy: the country’s Q4 GDP amounted to 5.4% YoY, although analysts predicted growth by 5.8%. The indicator strengthened by 1.3% QoQ, which is also inferior to the preliminary market estimates of 1.4%. The volume of industrial production in December decreased by 1.0%, which confirmed the forecast of experts.
On Friday, February 18, traders will follow the publication of Japan’s nationwide Core CPI for January. A slight increase of 0.3% is expected. Before the release of these macroeconomic statistics, the USD/JPY pair may grow to 116.10.
Support and resistance
The long-term trend in the USD/JPY pair is upwards. After reaching the level of 116.10 last week, the instrument corrected to the area of 115.30 but this level was held, which led to a new upward impulse towards the breakout of 116.10.
The first target for the medium-term uptrend around the January high at 116.25 was reached last week and the asset rushed to the target zone 4 (117.29–117.07). The nearest support levels from which long positions can be considered are at 115.03 and 114.31.
The sterling fell by almost 1.4% against the dollar during yesterday’s trading session after the Bank of England surprisingly decided to leave the interest rate unchanged. The sentiment is now negative as the main support level of 1.3575 was violated and the price found support at the zone of around 1.3485. In the last trading session of the week, the Cable would probably consolidate at around 1.3485.
The Cable is in a clear downtrend and, in the early hours of today, prices gravitate around the local support of 1.3360. Due to the shrinking activity, a corrective wave with a target of around 1.3500 can be expected. The first daily resistance for the pair is 1.3427. The current expectations are for new declines and a breach of 1.3360 would pave the road towards 1.3200. A change in sentiment can only be expected if prices stay above 1.3550.
During yesterday’s session, the bulls did not have enough strength to start a significant correction, but despite that the Cable stabilised around the zone of 1.3665. If the pair remains under the mentioned level, the most probable scenario will be for a move towards the support of 1.3575, which would strengthen the negative expectations for the future path of the GBP/USD. If the buyers prevail, their first resistance could be found at the level of 1.3715, followed by the next target of 1.3759.
The currency pair failed to stay above the important resistance at 1.1920 and it is expected for it to test this level again. If the EUR/USD manages to breach the resistance at 1.1920, it should head towards the local high at 1.2010. Conversely, if the test proves to be unsuccessful, the pair could enter a corrective phase, which should be limited by the support levels at 1.1892 and at 1.1827.
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.