EUR/USD: correcting lower, 1.0650 key short-term

Valeria Bednarik FXStreet

EUR/USD Current price: 1.0662

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The EUR/USD pair retreated ahead of the release of US inflation figures, unable earlier on the day to surpass a critical resistance with yesterday's rally, the 38.2% retracement of the November/January decline at 1.0710. Germany and the EU released their final revisions of December inflation figures, which matched market's expectations and initial estimates, and therefore having no effect over the pair. US inflation also matched market's forecast, with the year-on-year core reading up to 2.2%, rising for a fifth consecutive month. Later today, US FED's Janet Yellen, will speak on "The Goals of Monetary Policy and How We Pursue Them" at the Commonwealth Club, in San Francisco.

Technically, the short term picture for the pair is modestly bearish, given that in the 1 hour chart, the price is below a bearish 20 SMA, whilst technical indicators stand in bearish territory, although reversing their downward strength. In the 4 hours chart, a bullish 20 SMA around 1.0650 provides a strong dynamic support, whilst technical indicators continue correcting lower within positive territory, lacking enough momentum to confirm a bearish extension.

Support levels: 1.0650 1.0610 1.0565

Resistance levels: 1.0710 1.0745 1.0780

GBP/USD Current price: 1.2284

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The GBP/USD pair fell sub-1.2300 as the dollar bounced on easing risk aversion, falling to a session low of 1.2266 ahead of the release of US inflation data. In the UK, the latest employment report came in better-than-expected as jobless claims fell by 10.1K in December, against a 3.7K rise expected, while there was a strong advance in wages, as Average hourly earnings, excluding bonus, rose 2.7% in the three months to November. The unemployment rate hold steady at 4.8% against expectations of an uptick to 4.9%. Nevertheless, Tuesday's rally was way overstretched considering that PM May actually confirmed a hard Brexit, something that will keep the Pound pressure in the long run. From a technical point of view, the 1 hour chart shows that technical indicators are turning modestly higher near oversold readings, whilst the price remains below a sharply bearish 20 SMA. In the 4 hours chart, technical indicators are barely retreating from overbought readings, but the price remains well above a bullish 20 SMA, limiting chances of a steeper decline. Still, as long as the price remains unable to regain the 1.2330 region, the risk will remain towards the downside.

Support levels: 1.2275 1.2230 1.2190

Resistance levels: 1.2345 1.2390 1.2440

USD/JPY Current price: 113.45

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Modest correction, but still bearish. The USD/JPY pair is modestly higher this Wednesday, but trading around the same levels as Tuesday's pre-US opening levels. Easing risk aversion, higher stocks and lower commodity prices are helping the pair to bounce, albeit the dominant bearish trend persists. FED's Yellen will speak this afternoon, and her words may affect the pair, with the upward move possibly extending up to 114.00 should her wording be hawkish. Short term, the 1 hour chart shows that technical indicators remain well above their mid-lines, losing partially their upward strength, whilst the price remains well below its moving averages, with the 100 SMA currently reinforcing the static support at 114.00. In the 4 hours chart, indicators are recovering from oversold readings, but still within bearish territory, whilst the 100 SMA extended its downward move, converging now with the 200 SMA at 116.00.

Support levels: 113.20 112.70 112.25

Resistance levels: 113.60 114.00 114.50

Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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