Forex Analysis


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EUR/USD: all eyes on FOMC’s wording

EUR/USD Current price: 1.2509


The markets experienced high volatility this Tuesday, with oil and the Russian Ruble being the main drivers. As for the first, the crude futures fell below $ 55.00 whilst Brent quoted below $ 60.00 a barrel, spurring risk aversion across all the financial assets. When it comes to the second, Monday intervention from the Russian Central Bank was not enough to prevent an over 1000 pips rally in the USD/RUB advancing 20% in just four hours. The collapse in both, RUB and OIL boosted the demand for safe-havens, with JPY standing as the overall daily winner. In the fundamental front, European data beat expectations, supporting EUR advance, while US housing readings missed expectations. On Wednesday, the FOMC will have its last meeting of the year, and market expectations are of a change in the wording when it comes to maintain rates at record lows and lose the words “considerable time.” If that’s the case, the USD can regain the ground lost these days, yet if the FED disappoints, the dollar sell-off will likely extend into year-end.

Technically the 1 hour chart of the EUR/USD pair shows price has pulled back from its daily high of 1.2569, but found support in a bullish 20 SMA currently at 1.2485. Indicators in the mentioned time frame had eased from overbought levels but remain well into positive territory. In the 4 hours chart the price also extended above a bullish 20 SMA, whilst indicators lost the upward tone, and head lower above their midlines. The upcoming movements will remain related to risk sentiment, yet FED’s decision will probably gather all of market’s attention and determinate what’s next for the EUR/USD.

Support levels: 1.2485 1.2440 1.2400

Resistance levels: 1.2530 1.2570 1.2620

EUR/JPY Current price: 146.60

The EUR/JPY cross trades around its daily opening after posting a daily low of 144.95, level last seen since past November 17th. The pair recovered 200 pips by London close, as equities recovered ground alongside with oil and Ruble settled, but failed to regain the 147.00 level. Short term, the 1 hour chart shows price retraced from a bearish 100 SMA acting as dynamic resistance around 147.10, while indicators maintain a mild positive tone above their midlines.  In the 4 hours chart however, indicators managed to correct oversold readings but stalled below their midlines, turning slightly lower ahead of Asian opening. The risk sentiment that dominates markets favors the Japanese yen, with another run below 146.30 pointing to a retest of the lows 145.00.

Support levels: 146.30 145.90 145.50

Resistance levels: 146.80 147.45 148.05

GBP/USD Current price: 1.5745

The Pound rallied against the greenback after bottoming daily basis at 1.5609, despite inflation in the UK fell to its lowest rate in more than a decade in November, printing 1% yearly basis. The broad dollar weakness in the highest spike of risk aversion however, drove the pair to a daily high of 1.5785, also the highest of the month. Nevertheless sellers once again limited the advance, with the pair now consolidating in the 1.5750 price zone. Short term, the 1 hour chart shows that price extended well above its 20 SMA that maintains a clear bullish slope, while indicators stabilize near overbought readings. In the 4 hours chart 200 EMA capped the advance currently around the mentioned daily high, while indicators turned lower now approaching their midlines. Renewed buying interest needs to push the price above 1.5780 area to be able to gain momentum and see the pair extending beyond the 1.5825 level, next strong static resistance.

Support levels:  1.5730 1.5680 1.5650

Resistance levels: 1.5785 1.5825 1.5860

USD/JPY Current price: 117.32

The USD/JPY pair erased most of its intraday losses, having reached a daily low of 115.55 before recovering almost 200 pips as pressure over stocks eased in the American afternoon. With the dollar following stocks and CHF pegged to EUR, the Japanese Yen stands as the preferred safe haven these days, and considering the sharp decline following last October BOJ meeting, investors run to buy the Asian currency. The 1 hour chart for the pair shows that the latest recovery stalled well below a bearish 100 SMA, currently around 118.20, while indicators corrected extreme oversold readings and stand now flat around their midlines. In the 4 hours chart the technical picture is quite similar, with indicators regaining the downside after correcting oversold readings well below their midlines. Most of what’s next for the pair will depend on FED’s decision with a less hawkish than expected US Central Bank probably triggering another bearish run.

Support levels: 117.00 116.60 116.25

Resistance levels: 117.75 118.20 118.65

AUD/USD Current price: 0.8216

The Australian dollar saw little relief on dollar decline, as the AUD/USD pair stands near the multiyear low posted early Tuesday at 0.8199. The early Asian dip followed the release of the Chinese HSBC PMI Manufacturing index that dropped in December, according to the preliminary reading to 49.5, from 50.0. Later on the day, the pair surged briefly to a 2-day high of 0.8274, but was unable to hold to its gains. Technically speaking the 1 hour chart shows the price developing below its 20 SMA as indicators lose directional strength right below their midlines. In the 4 hours chart the technical bias is bearish, as per the price contained below a bearish 20 SMA and indicators heading south below their midlines. The pair has little chances of rallying higher, and if that’s the case, sellers will likely keep adding positions, limiting the upside.

Support levels: 0.8190 0.8145 0.8110

Resistance levels: 0.8260 0.8300 0.8340

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