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 Sterling also took losses in the past week, with the decline being limited by the support of 1.3665. The key support remains 1.3575, and the first resistances are 1.3715 and 1.3760. There may be a change in the current sentiment if the resistance of 1.3715 is violated, and if prices rise above 1.3800, a continuation of the uptrend can be expected. The interest rates decision of the Bank of England this Thursday at 13:00 GMT will be decisive for the movement of the pair. A potential interest rate hike would shoot the sterling towards 1.3950.
The bulls couldn’t manage to breach the resistance at 1.3500 and the consolidation still continues in the interval between 1.3400 and 1.3500. The expectations for today’s trading session are for the pair to test the support at 1.3350. If this level is breached, then a downward movement towards the next support at 1.3300 would be the most probable scenario. At the time of writing, a short-lived bullish offensive towards 1.3500 before the sell-off continues still cannot be excluded.
USDCHF the likelihood of the growth of the instrument remains
USDCHF the likelihood of the growth of the instrument remains. The USD/CHF pair moves within a long-term uptrend, growing from the 0.9175 support level to the target at 0.9260.
The positive dynamics of the asset was caused by the strengthening of the US dollar against all major currencies, supported by analysts’ expectations, who believe that this week, the US Federal Reserve officials will decide to accelerate the curtailment of the bond purchase program and will report an increase in interest rates in 2022.
The regulator meeting will be held tomorrow, after which at 21:00 (GMT+2), economic forecasts and the statement of the Federal Open Market Committee of the US Federal Reserve (FOMC) will be published, and the decision on the interest rate will be announced. It is expected to remain at 0.25%, so investors’ attention will be focused on a press conference, where the head of the department, Jerome Powell, is likely to clarify the specific timing of the interest rate hike in 2022 to combat high inflation.
In general, the American labor market allows one to think about tightening monetary policy. Unemployment is declining. Last week, Initial Jobless Claims was a record low and amounted to 184K instead of the forecast of 215K. The index of consumer expectations from the University of Michigan for December (preliminary data) was 67.8 points. Analysts predicted a value of 62.0 points against the previous figure of 63.5 points.
The consumer sentiment index from the University of Michigan for the same period (preliminary data) amounted to 70.4 points, which is better than the forecast of 67.1 and the previous value of 67.4 points. Against this background, the news about the growth of the producer price index in Switzerland for November by 0.5% did not provide significant support to the franc.
Support and resistance
The long-term trend is upward with the target at 0.9260, the breakout of which will allow reaching 0.9339.
The medium-term trend is downward. Last week, market participants tested the key resistance of the trend 0.9280–0.9269, but so far, it is holding, maintaining the likelihood of a decline in quotations with the target at the November low.
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.
The dollar lost most of the week’s gains after a wave of sell-offs around 114.92. The pair is thus again finding itself in the range between 113.41 and 114.41. Currently, the sentiment is rather neutral, with the bears prevailing if prices fall below 113.77. In such a scenario, a breach of 113.41 and a test of the support at around 112.75 can be expected. The bulls still have a chance to test the 114.92 resistance again, and a weekly close around this zone would significantly increase the odds of a new rally developing. Should sentiment shift to safe haven assets instead, there may be more declines coming for the Ninja.
The bulls failed to gain enough momentum and the upward move was limited at the 1.1668 resistance zone. At the time of writing, the currency pair is just above the support level of 1.1623, and this time, the bears could gain enough strength for a successful breach of that level. An unsuccessful breach, on the other hand, could form a short-term range between 1.1632 – 1.1668. Today, the data on the preliminary manufacturing PMI for the euro area (08:00 GMT) could affect the volatility of the market.
