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.
GBPUSD the US dollar went down. The GBP/USD pair moves within an uptrend around 1.3588 amid a statement by British Prime Minister Boris Johnson about a possible reduction in the quarantine period from seven to five days.
According to the official, the UK showed success in the fight against the Omicron strain, but the hospitalization rate is still unacceptably growing. The government announced that people could come out of quarantine three days earlier if they test negative for coronavirus twice. The reluctance of the authorities to introduce a new lockdown and tighten the existing quarantine measures instills optimism in investors. Macroeconomic statistics for December were also positive. Following the manufacturing sector, Construction PMI was also better than expected, reaching 54.3 points against the expected 54.0 points. British Retail Consortium (BRC) retail sales rose by 0.6% YoY with an expected 0.3% growth.
USD Index began to decline slightly after staying above 96.000 for the holiday weekend and is now at 95.800. Investors react to the recent poor labor market data, assessing the prospects for a change in the course of the US Federal Reserve’s monetary policy in early spring. This week, consumer prices data will be released, and inflation will intensify. According to analysts’ forecasts, it may exceed 7% YoY, which has not happened for more than forty years.
Support and resistance
The asset moves within the global downtrend channel, preparing to overcome the resistance line. Technical indicators keep a global buy signal: fast EMAs on the Alligator indicator are above the signal line, and the AO oscillator histogram forms upward bars in the buy zone.
The bulls entered the market and the sterling recovered some of its recent losses against the dollar. The currency pair breached the resistance zone of 1.3500, but the upward movement was limited by the resistance of 1.3575. The market sentiment remains negative and the pair would most probably head towards a test of support level of 1.3427.
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).
The bulls still cannot prevail over the bears and, at the time of writing, the currency pair is located under the 1.1618 resistance zone. The few failed attempts at breaching the mentioned level could give the bears the necessary incentive to attack the next significant support of 1.1575. Today, the focus for investors will be the announcement of the European Central Bank interest rate decision (11:45 GMT), as well as the announcement of the initial jobless claims data for the U.S. (12:30 GMT). The outcome of the mentioned economic news could largely determine the future of the currency pair.
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.
AUDUSD Australian economy is actively recovering. After a significant drop last week, the AUD/USD corrects upwards, trading at 0.7077.
The main driver of the positive dynamics was the accompanying statement by the head of the Reserve Bank of Australia (RBA) Philip Lowe after the regulator did not change the monetary policy and left the interest rates at the previous levels of 10 basis points. Securities purchases will continue at A $4B per week. In his speech, Lowe noted that the country’s economy had begun to show a positive recovery from the Delta outbreak, and the main positive was coming from the labor market, where wages are gradually increasing.
Core inflation is 2.1%, which is in line with expectations, and headline inflation barely exceeds 3%, driven by high gasoline prices and disruptions in supply chains. In general, the negative factors are gradually decreasing, and in the next quarter, a positive dynamic of the currency is expected.
USD Index stays at the previous week’s levels near 96.200 amid the lack of key macroeconomic publications. Trading activity for the instrument may increase as early as Wednesday when Initial Jobless Claims will be published. Analysts predict the labor market’s growth, expecting a decrease in the number of applications to 213K from 222K last week.
Support and resistance
On the global chart, the price forms a downtrend, within which it prepares for a reversal. Technical indicators keep a sell signal: indicator Alligator’s EMA fluctuations range is wide, but the AO histogram has formed the first upward bar.
