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EUR/USD, EUR/GBP and USD/JPY remain bearish but find short-term support

EUR/USD and USD/JPY probe trend lines while EUR/GBP stabilises at key support amidst much weaker than expected UK retail sales.

EUR/USD weighs on channel support

EUR/USD slid all the way back to its two-month channel support line at $1.1304 which offered short-term support.

A drop through and weekly Friday close below the channel support line at $1.1304 would engage the late December and early January lows at $1.1274 to $1.1272. Further down sit the mid-December low at $1.1222 as well as the November trough at $1.1186, both of which would become downside targets on a drop below the $1.1272 early January low.

Immediate downside pressure will remain in play while the cross stays below yesterday’s high at $1.1369 and, more importantly, the late-November and December highs at $1.1383 to $1.1387.

EUR/GBP levels out above yesterday’s low at £0.8305 post weaker than expected UK retail sales

Yesterday EUR/GBP briefly made a new year-to-date (YTD) low at £0.8305, right within the £0.8313 to £0.8277 major support area, made up of the December 2016, April 2017, December 2019 and February 2020 lows.

Short-term minor stabilisation is likely to be seen over the next few days since positive divergence on the daily relative strength index (RSI) accompanied this week’s low at £0.8305 which itself was made at key support. Divergence between the price and an indicator more often than not leads to at least some consolidation and can sometimes trigger a trend reversal. In case of the EUR/GBP pair, the two-month resistance line and December low at £0.8358 to £0.8368 have been revisited in the wake of month-on-month (MoM) UK retail sales which came in at -3.7% versus -0.6% expected and +1.% the previous month.

While this week’s high at £0.8379 isn’t exceeded, however, overall downside pressure should remain in play with the December 2019 and February 2020 lows at £0.8282 to £0.8277 representing key long-term support which will probably again hold, if tested. Only if slid through, would the way open up for the next lower April 2016 high at £0.8118 to be reached.

USD/JPY slid to two-month uptrend line as Japan CPI rises the most in 2 years

The Japanese yen strengthened further versus the US Dollar as Japan’s consumer prices showed the highest annual inflation rate since December 2019.

From a technical perspective, the two-month uptrend line at ¥113.63 offered USD/JPY support in Asian trading, though, marginally above last week’s low at ¥113.48. If fallen through, the mid-December trough at ¥113.14 would represent the next downside target, together with the late November low at ¥112.53.

Minor resistance can be encountered along the 55-day simple moving average (SMA) at ¥114.30 as well as along the one-month downtrend line at ¥114.72. The next higher ¥115.06 mid-January high and the November peak at ¥115.52 would need to be bettered for the bearish outlook to be questioned.

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

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