The currency pair managed to stay above the 1.1839 level and, at the time of writing, is preparing to test the key resistance at 1.1892. Even if the resistance at 1.1892 is to be breached, the expectations are for the pair to shortly trade above the mentioned level before returning to values below it. The first important support is the level of 1.7961. Today, investors will be focused on the speech of the ECB President Christine Lagarde (08:15 GMT).
USDJPY the US dollar began a rapid decline. USD/JPY is correcting, trading around 113.53. The yen reacted slightly to today’s decision by the Bank of Japan, which continued to pursue a policy of negative rates since, at the moment, it does not see a significant improvement in the economy, which would allow something to change.
The interest rate remained at the level of –0.10%, the purchase of Japanese government bonds (JGB) will continue without setting an upper limit, and their yield will remain near zero. The bank plans to acquire exchange-traded funds (ETFs) with a cap of 12T yen and Japanese real estate trusts (J-REITs) with a cap of 180B yen and 20T yen corporate bonds at least the end of March 2022. It follows from this that the regulator does not expect significant improvement in economic indicators, at least until spring, and the pressure on the yen will remain the same.
Tension around the dollar is growing, and for the first time since the beginning of December, the USD Index fell below 96 points after publication data on the labor market. Initial Jobless Claims rose to 206K after falling to 188K last week. Additional pressure on the American currency was exerted by a significant drop in the index of manufacturing activity from the Federal Reserve Bank of Philadelphia, which reached a year low at 15.4 points after 39.0 points in the previous period.
Support and resistance
The asset corrects, forming a possible Head and shoulders reversal pattern. Technical indicators are in a state of uncertainty: indicator Alligator’s EMA fluctuations range narrowed almost completely, and the histogram of the AO oscillator forms new upward bars, being close to the transition level.
XAUUSD the price develops a corrective impulse. Today, during the Asian session, gold prices grow moderately, developing the correctional impulse formed yesterday, and test the level of 1790.00 for a breakout, waiting for new drivers to appear.
More active positive dynamics are hindered by an increase in optimism in the market since the new strain of coronavirus will not be a significant obstacle to the further recovery of the global economy.
Pressure on the instrument is also exerted by the rather strong positions of the American currency, as traders expect that the US Federal Reserve will accelerate the withdrawal of the quantitative easing (QE) program during the December meeting. Earlier, the head of the regulator, Jerome Powell, recognized the risks of systemic inflation and noted that additional efforts might be required to stabilize prices in the country.
The US labor market report for November released last Friday also signaled in favor of a faster monetary tightening. The unemployment rate fell sharply from 4.6% to 4.2%, well ahead of analysts’ forecasts of a decline only to 4.5%.
Support and resistance
On the daily chart, Bollinger bands steadily decline. The price range narrows sharply, indicating an ambiguous nature of trading in the short term. The MACD indicator grows, maintaining a poor buy signal (the histogram is above the signal line). Stochastic shows more active growth but rapidly approaches its highs, indicating limited potential for developing ultra-short-term corrective growth.
NZDUSD the instrument is weakening. Due to the growth of the US dollar, the NZD/USD pair corrects, trading near the level of 0.6822.
The number of new cases of infection with the Delta strain in New Zealand is on the rise, and Prime Minister Jacinda Ardern has announced that the country would not be able to completely get rid of the pandemic, so there was little point in restrictions, and 0othey would be lifted. As for the economic indicators, a foreign trade report was recently published. According to the October data, the volume of exports increased to 5.35B dollars, while imports amounted to 6.64B. The trade balance reached –1.286B MoM, which is better than –2.206B for September, and –4.920B YoY, down from –4.110B a month earlier.
The American currency index is growing, reaching the level of 96.700. Against the background of a hiatus in trading due to Thanksgiving Day, the key growth drivers for the dollar are the news of the re-election for a second term of the head of the US Federal Reserve, Jerome Powell, and the largest decline in the number of applications for unemployment benefits in the last 50 years: the figure fell to 199K.
Support and resistance
The asset left the ascending channel, breaking the support line. Technical indicators keep a stable sell signal: fast EMAs on the Alligator indicator is below the signal line, and the histogram of the AO oscillator trades in the sell zone, forming downward bars.
The dollar continues to depreciate, with the single European currency trying to breach the resistance level at 1.2300, albeit unsuccessfully. The bears managed to hold their ground and limited the appreciation of the euro to just below 1.2270. However, the sentiments remains positive – for overcoming the mentioned resistance and for a test of the next level at around 1.2400, followed by a move towards 1.2500. During the last trading session for this week, no economic news that would cause significant market fluctuations are present in the economic calendar. However, investors are still focused on the U.S. government’s decision to provide additional fiscal stimulus.
WTI Crude Oil correction after reaching record highs
WTI Crude Oil correction after reaching record highs. Prices for WTI Crude Oil show a slight decrease, correcting after a strong growth the day before, which led to an update of record highs. Quotations continue to be supported by fears of supply disruptions, which are only intensifying as tensions grow in Eastern Europe and the Middle East.
In turn, pressure on the instrument on Wednesday was exerted by a published report from the US Department of Energy, according to which oil product inventories last week increased by 2.38M barrels to 416.19M barrels. Over the past period, the growth rate was 0.515M barrels, while the forecasts even suggested a decrease of 0.728M barrels.
Support and resistance
Bollinger Bands in D1 chart demonstrate the uptrend. The price range is narrowing, pointing at the ambiguous nature of trading in the short term. MACD histogram is slightly growing keeping a weak buy signal (located above the signal line). Stochastic is located in close proximity to its highs, which points to the risk of the overbought instruments in the ultra-short-term.
Existing long positions should be kept in the short and/or ultra-short-term until the signals from technical indicators clear up.
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.
