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.
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