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EUR/USD, EUR/GBP rally strongly in wake of hawkish ECB while USD/JPY recovers

EUR/USD flirts with the January high after ECB press conference, EUR/GBP reversed from major support and USD/JPY in recovery mode.

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EUR/USD’s surges higher on hawkish ECB

EUR/USD rallied by more than 150 pips following the European Central Bank’s (ECB) president Lagarde’s hawkish comments in which she declined to rule out an interest rate rise this year saying the bank would assess conditions very carefully and there were "no pledges without conditionalities".

The January peak at $1.1482 is thus within reach, a rise above which would put the $1.1513 to $1.1529 area back on the cards. It consists of the October and 5 November lows.

Potential slips should find support along the breached 2021-to-2022 downtrend line at $1.1412. Further support can be spotted between the late November and December highs at $1.1386 to $1.1382.

EUR/USD chart Source: IT-Finance.com
EUR/USD chart Source: IT-Finance.com

EUR/GBP rallies from major long-term support in the wake of BoE and ECB meetings

Yesterday EUR/GBP first slipped to its key long-term support at £0.8305 to £0.8277 following the Bank of England’s (BoE) widely anticipated rate hike by 25 basis points (bps) to 0.5% before strongly rallying from it once the ECB's president Lagarde made hawkish comments. This has led to a reversal in the trend with a very long bullish candlestick having been formed, encompassing the last seven trading days which is very bullish price action.

The rally through the three-month downtrend line and above the January peak at £0.8422 bodes well for the bulls with the 200-day simple moving average (SMA) at £0.8516 being targeted. For today minor potential resistance sits at the £0.8454 mid-December low.

Support now comes in between the November trough and breached downtrend line at £0.8381 to £0.8374.

EUR/GBP chart Source: IT-Finance.com
EUR/GBP chart Source: IT-Finance.com

USD/JPY bounces off the 55-day SMA

USD/JPY’s drift lower from the late January high at ¥115.68 paused along the 55-day SMA at ¥114.41 before heading back up again with the mid-January high at ¥115.06 being within its sights.

Next up lurk the November peak at ¥115.52 and late January high at ¥115.68, only a rise above which would lead to the early January high at ¥116.35 being back on the map.

Minor support sits between the one-month support line and 2 February low at ¥114.36 to ¥114.16 with further support coming in at the 8 December high at ¥113.96. More important support lies between the mid-to-late January lows at ¥113.48 to ¥113.47.

USD/JPY chart Source: IT-Finance.com
USD/JPY chart Source: IT-Finance.com

This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa 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. See full non-independent research disclaimer and quarterly summary.

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