Like most of the major currency pairs, the pound also lost ground against the U.S. dollar during last week. The bears lost momentum around the support zone of 1.3360, where the bulls intervened and tested the resistance of 1.3427. The current breach of the mentioned resistance cannot be considered as completed and, in case we do not receive confirmation, the most probable scenario would be for a second reduction and a test of the 1.3360 support area.
USDCHF probability of a growth asset remains, After last week’s correction to the area of 0.9180–0.9160, USD/CHF quotes continue their upward trend against the background of the publication of data on a decrease in unemployment rate in the USA last month by 0.3%.
Last Friday, statistics on the US labor market were released. The dynamics of changes in the number of people employed in the non-agricultural sector disappointed investors and amounted to only 210K instead of the 550K predicted by analysts. However, the markets were able to recover from a short-term correction in the USD, playing back data that recorded a decrease in the unemployment rate in the country.
The indicator was 4.2% with a forecast of 4.5%. According to key indicators, the national economy continues to approach the pre-crisis levels of the beginning of last year, which has a strengthening effect on the US currency.
The long-term trend in USD/CHF is upward with the aim of growth near the November high of 0.9360. The key trend support is located at 0.9089.
The mid-term trend changed to a downward one last week after the breakdown of the key support at 0.9258–0.9247 and the price-fixing below it. Now the target for sales is target zone 2 (0.9147–0.9136). The price of USD/CHF is being adjusted and is trying to test the trend boundary of 0.9280-0.9269. The most optimal entrances to sales transactions are located in the area of 0.9280-0.9247.
Support and resistance
Resistance levels: 0.9360, 0.9434.
Support levels: 0.9119, 0.9089.
Short positions may be opened from the level of 0.9270 with targets at 0.9150 and stop-loss at 0.9305.
Implementation time: 7-10 days. Long positions can be opened above 0.9305 with target at 0.9400 and stop-loss at 0.9270.
Scenario:
Recommendation SELL LIMIT Entry point 0.9270 Take Profit 0.9150 Stop Loss 0.9305 Key levels 0.9089, 0.9119, 0.9360, 0.9434
Alternative Scenario:
Recommendation
BUY STOP Entry point 0.9310 Take Profit 0.9400 Stop Loss 0.9270 Key levels 0.9089, 0.9119, 0.9360, 0.9434
The logistical chaos and restrictions on mobility in the EU because of the new mutation of the virus continue to weigh heavily on the euro. This helped the bears prevail and the support zone at 1.2206 could not hold the negative impulse. The price dropped and headed for a test of the major target at 1.2161. A successful breach of the aforementioned zone would easily lead to future losses for the EUR against the USD and would pave the way to the lower support level at 1.2084. At the time of writing, the most probable scenario is for a retracement towards the level of 1.2206, which is now acting as a resistance. If the push is successful, we should see an attack of the upper target at 1.2268. Today, investors would be keeping an eye on the initial jobless claims data (13:30 GMT) and the new home sales data (15:00 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 potential for further growth remains. The decline of USD/CAD from 1.2827 stopped at 1.2631 after the decision of the Bank of Canada to leave the interest rate unchanged at 0.25%.
The maintenance of the current course of monetary policy by the financial regulator is associated with the revision of inflation targets. Deputy Governor of the Bank of Canada Toni Gravelle said the day before that fears about the risks of a jump in consumer prices are only growing at the moment.
In turn, the decrease in the number of initial jobless claims in the United States to 184K strengthens the US dollar (analysts predicted the figure at 215K). Today the markets will be influenced by US inflation data, which will be published at 15:30 (GMT+2). Core inflation is expected to be 4.9% on an annualized basis and 0.5% on a monthly basis. Further growth in consumer prices prompts the US Fed to tighten monetary policy. The first step aimed at changing the current situation in the national economy will be the curtailment of the bond repurchase program, which is planned to be phased out by mid-2022.
Support and resistance
The long-term trend in USD/CAD is upward. This week the support level of 1.2631 was tested, which was held by the traders. Then USD/CAD quotes reached 1.2700 and now the main target of growth is at 1.2827, the breakout of which will allow the “bulls” to consolidate in the area of 1.2910.
The medium-term trend is upward. Target zone 2 (1.2775–1.2752) was broken out last week. The next upside target is target zone 3 (1.3021–1.2997). This week the price has corrected to the key trend support area at 1.2614–1.2592, which was held, and as a result, the price continued to rise.
USDJPY The dollar is actively losing value. Due to the weakening rate of the American currency, the USD/JPY pair corrects downwards, trading around the level of 114.47.
The Japanese currency is moving without pronounced dynamics amid a worsening epidemiological situation due to the rapid spread of the Omicron coronavirus strain. Over the past day in Tokyo, 21.5K, new infection cases were detected in the population, another record since the pandemic’s beginning. However, the country’s authorities have said that no emergency regime is planned, and although medical institutions have reported that hospital bed occupancy is already over 50%, the situation is under control. As for macroeconomic statistics, there are no reasons for positive either: the January PMI index in the services sector fell to 47.6 points from 52.1 points in December, and the indicator dynamics have remained negative since last autumn.
The US dollar index is falling, having reached local support of around 96.000. Investors were extremely disappointed by Nonfarm Payrolls, the outflow of which amounted to 301K with a projected increase of 207K workers. The indicator turned negative for the first time since January last year when a value of –78K. Today, data on jobless claims will be published, and the labor market expects a significant increase in new claims, which may negatively affect the dollar dynamics.
Support and resistance
The asset is being corrected within the global upward channel. Technical indicators are again in a state of uncertainty: fast EMAs on the Alligator indicator are preparing to cross the signal line downwards, and the AO oscillator histogram is again forming down bars.
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.
