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.
The common European currency continues to depreciate against the dollar as yet another support level, this time the one at 1.1957, was easily violated at the end of last week. The forecast is for the sell-off to continue, pushing the currency pair towards a test of the support at 1.1860. In the positive direction, the key resistance level is 1.2028. This week, investors’ attention will be focused on the European Central Bank interest rate decision (Thursday; 12:45 GMT) and the CPI data for the U.S. (Wednesday; 13:30 GMT).
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 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.
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).
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.
USDCAD Canadian inflation hits 1991 levels. Against the backdrop of Canadian macroeconomic statistics, the USD/CAD pair shows local sideways dynamics, trading at 1.2691.
According to the January report, Canada’s consumer price index rose by 0.9% MoM instead of 0.6% expected, which contributed to the growth of the annual rate to 5.1%, which is higher than 4.8% in December. The same index, excluding prices for raw materials and food products, was 4.3%, rising from 4.0% a month earlier. According to a report released Wednesday by the National Bureau of Statistics, Canada’s inflation rate rose to 5.1% last year, the highest since September 1991. With labor market indicators, this growth is not as critical as in the US, and the Bank of Canada has the time and opportunity to control the situation.
The American currency continues to trade without pronounced dynamics, as declines due to ambiguous macroeconomic statistics replace the rises almost the next day. The current local weakening is associated with another increase in the number of people receiving unemployment benefits, which this week amounted to 248K against 225K a week earlier. Analysts had expected a decline to 219K, and the final result disappointed the market. We should also note a significant reduction in the index of manufacturing activity from the Philadelphia Fed, which fell to 16.0 points in February from 23.2 points a month earlier.
Support and resistance
On the global chart, the price moves within the local triangle pattern. Technical indicators are in the state of a local buy signal: the range of EMA fluctuations on the Alligator indicator is directed upwards, and the AO oscillator histogram forms ascending bars in the buying zone.
