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USD/JPY comes off near 24-year highs while EUR/USD and EUR/GBP capped

USD/JPY looks short-term toppish while EUR/USD and EUR/GBP flirt with resistance

​EUR/USD trades close to resistance

EUR/USD gradual rise from its current June low at $1.036 has once more run out of steam below the 55-day simple moving average (SMA) at $1.0633 despite the Federal Reserve (Fed) Chair Jerome Powell mentioning the possibility of a recession in the US in his testimony to Congress on Wednesday.

Wednesday’s intraday high at $1.0605 was only marginally made above the $1.0601 mid-June high but as long as Wednesday’s low at $1.047 underpins, another attempt to break through the minor $1.0601 to $1.0633 resistance zone is likely to ensue. If so, the four-month downtrend line at $1.069 would be in focus.

Potential slips below Wednesday’s low at $1.047 would engage the 17 June low at $1.0445. Below it major support remains to be seen at the $1.036 to $1.035 May and current June lows. Failure at $1.035 could lead to a slide towards parity taking place.

EUR/GBP continues its gradual advance

EUR/GBP is trying to overcome its £0.8618 May high as the UK is experiencing 40-year high inflation at 9.1% Year-on-Year (YoY), the country’s largest rail strike in 30-years and is plagued by recession fears.

Should a daily chart close above £0.8618 unfold, a continued gradual rise may take the cross all the way to its one-year high at £0.8721, made marginally below the 200-week SMA at £0.8723.

Slips should find support between the late May and early June highs at £0.8592 to £0.8587 with further minor support coming in at the 21 June low at £0.8569. ​Only currently unexpected failure at £0.8569 would lead to the three-month uptrend line at £0.8543 being back in play.

USD/JPY comes off near 24-year highs

USD/JPY is seen coming off its ¥136.71 near 24-year high as the US dollar is taking a breather amid comments from Fed Chair Jerome Powell evoking the possibility of a US recession in his testimony before Congress on Wednesday and as the Japanese yen is benefitting from weaker oil prices, given that Japan is a big net importer of the commodity.

The technical picture is also interesting in that negative divergence can be spotted on the daily 9-period Relative Strength Index (RSI) which made a lower low and thus did not confirm the higher high seen on the daily USD/JPY chart. Such divergence in most instances leads to at least a short-term countertrend move with the cross expected to slip back towards its one-month support line at ¥133.25.

While the mid-June low at ¥131.50 holds, however, the medium-term uptrend remains intact. A rise and daily chart close above this week’s multi-decade high at ¥136.71 would engage the minor psychological ¥140.0 barrier and then the June 1991 peak at ¥142.80.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material 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 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. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research 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.

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