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.
The attempt to breach the support of 1.1623 was not successful and, at the time of writing this analysis, the currency pair is preparing to test the resistance zone between 1.1668 and 1.1687. A violation of the mentioned zone will pave the way towards the next goal of 1.1750, a breach of which would strengthen the positive expectations for the future path of the EUR/USD. On the downside, bears could attack the support level of 1.1623 and, if successful, could easily deepen the drop towards the level of 1.1582. A spike in volatility is likely during the announcement of the economic data for the initial jobless claims for the U.S. (today; 12:30 EEST).
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.
AUDUSD US inflation continues to break records. Due to skyrocketing inflation in the US, the AUD/USD pair corrects upwards, trading at 0.7173.
Although the next peak in the incidence of COVID-19 in Australia can be considered passed, the statistics on new infections remain quite high: last week, the figure hovered around 1450 cases per day, which does not allow the authorities of some regions to ease quarantine restrictions. As stated by the head of the Bank of Australia, Philip Lowe, it prevents the economy from recovering at a higher pace, which, in turn, keeps the national currency from more dynamic growth.
The US dollar has been moving within a narrow sideways range since the end of November. According to the latest data, the rate of inflation in the United States accelerated, and the index of the core CPI reached 4.9% YoY. The consumer price index renewed a multi-year record, rising to 6.8% from 6.2% a month earlier. Judging by these data, the US Federal Reserve has practically no choice: the regulator will have to quickly reduce the volume of the quantitative easing (QE) program and raise the interest rate. These actions can be announced at the next meeting, held on Wednesday.
Support and resistance
On the global chart, the price forms a downtrend, within which a reversal is being prepared. Technical indicators keep a weakening sell signal: indicator Alligator’s EMA fluctuations range narrows, and the AO histogram forms upward bars.
After the successful breach of the resistance at around 1.1623, there is a reversal of the trend in the currency pair. The sentiment remains positive – for continued growth and an attack of the resistance zone between 1.1668 and 1.1687. If this zone is successfully breached, the next target for the bulls would likely be the area at around 1.1750. The first daily support for the bulls is 1.1623, followed by the key level of 1.1582. Today, an increase in activity can be expected around the announcement of the consumer price index data for the euro area at 09:00 GMT.
The bulls did not manage to gain enough momentum to successfully breach the resistance zone of 1.1597 and, during the early hours of today`s trading session, the pair is trading just under the mentioned level. A new test of the level in question is a highly probable scenario and, if successful, the pair will most likely continue to recover and target the resistance level of 1.1639. However, if the bears regain control of the market and breach the support zone of 1.1528, the common European currency will most likely continue to lose ground against the greenback and move towards the levels of around 1.1400. During today’s session, volatility could spike when the data for the retail sales in the U.S. is announced (today; 12:30 GMT).
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).
