January 19 2022
Higher US Yields gave the impetus for the Dollar to make strong gains against the EUR. Breaking support at 1.1390 and 1.1360. Traders are starting to think the FOMC will have to hike US Interest rates quicker and higher than previously thought to tame inflation.
The US Dollar has regained its upside momentum keeping the pressure to the downside of EURUSD while below 1.1360.
There is support for the EURUSD at 1.1300, if broken expect a drop towards 1.1270 and possibly 1.1230 in extension. If the EURUSD can recover and break above 1.1360 the mood improves for the EUR and you would see an attempt at 1.1390/1.1400 resistance.
USDJPY found resistance at 115.00 tough going, however support at 114.50/40 has held, we favour another attempt on 115.00/10 resistance next. A break of 115.10 would set a target of 115.50/60.
However, if 114.40/50 support is broken expect further weakness to 114.00/113.90
Yesterday the GBPUSD broke 1.3640 support and dropped to 1.3572 on the back of higher US yields. However, today we will see the UK CPI for December, which is expected to headline at 5.2%. This should remind the cable market that the Bank of England will also have to hike UK interest rates sooner rather than later.
As long as support holds at 1.3570 you should expect the GBP to attempt to break resistance at 1.3640 if broken then the GBP will extend its gains to 1.3670/80 or 1.3700 in an extended move up.
However, a break of 1.3570 would see further weakness to the next support level at 1.3520 and possibly 1.3490.
Gold remains trapped in tight ranges, not sure if it wants to follow the strong the USD narrative, or be a hedge for inflation, or even a safe haven from geopolitical risk. At the moment it prefers to remain sidelined, or dazed and confused.
The same old support at 1800/1798 and 1830/1832 resistance, look to confine the trading range and make us complacent.
When the break finally comes it will be big, one way or another!
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