Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. You could sustain a loss of some or all of your initial investment and should not invest money that you cannot afford to lose. Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. You could sustain a loss of some or all of your initial investment and should not invest money that you cannot afford to lose.

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 stabilizes 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 stabilization 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.

This information has been prepared by IG, a trading name of IG US LLC. This material does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. You should not treat any opinion expressed in this material as a specific inducement to make any investment or follow any strategy, but only as an expression of opinion. This material does not consider your investment objectives, financial situation or needs and is not intended as recommendations appropriate for you. No representation or warranty is given as to the accuracy or completeness of the above information. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. Any research provided should be considered as promotional and was prepared in accordance with CFTC 1.71 and designed to promote the independence of investment research. See our Summary Conflicts Policy, available on our website.

Start trading forex today

Trade the largest and most volatile financial market in the world.

  • Spreads start at just 0.8 pips on EUR/USD
  • Analyze market movements with our essential selection of charts
  • Speculate from a range of platforms, including on mobile

Live prices on the most popular forex markets

liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading forex provider.

Stay on top of upcoming market-moving events with our customisable economic calendar.