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.
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 pound has halted its uptrend and a complex retracement is currently developing on the market. The first support for the bulls is the area of around 1.3760, and the first resistance is 1.3830. If it takes longer for the pullback to develop, it is expected to remain limited above the local support of 1.3720. Current sentiment remains positive, and should 1.3830 be breached, the next target for the buyers could be the area at around 1.3900.
The Cable recorded decent gains yesterday as the session ended close to the daily highs. In the early hours of today, the pair is holding steady – just below the resistance at 1.3272. Here, too, the trend is positive, as a breach of 1.3272 would allow the bulls to test the September high of 1.3481. Buyers can expect to find their first support at 1.3160 and a more substantial one at 1.3062.
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.
Daily technical analysis. The sentiment remained unchanged and, during the early hours of today`s trading, the currency pair continued to trade close to the support zone at 1.1359. If the bears gain enough momentum and manage to breach the mentioned zone, then a test of the next target at 1.1236 would be the most probable scenario and would strengthen the negative expectations for the future path of the EUR/USD.
However, if the bearish pressure fades and the bulls prevail, then they will most likely test the resistance zone at 1.1359. А successful violation of the aforementioned level could easily lead to a rally towards the levels from November 2021 – more specifically, the zone at around 1.1440. Event-wise, today volatility can be expected to pick up after the announcement of the ADP non-farm employment change for the U.S. (13:15 GMT) and the release of the FOMC meeting minutes (20:00 GMT).
During yesterday’s trading session, two consecutive breaches of the support levels of 114.23 and 114.42 ended the range phase for the Ninja and paved the way towards the resistance zone of around 115.50. In the negative direction, the mentioned level of 114.42 is now acting as a support, and the former lower border of the range at 113.40, in which the pair was previously trading, is the major support for the pair.
