Fri, Jun 02, 2023 @ 21:39 GMT
HomeContributorsTechnical AnalysisForeign Exchange Market Commentary

Foreign Exchange Market Commentary


The week started in a dull fashion, with investors lacking motivation to push currencies one way of the other, amid the absence of macroeconomic and political news. The EUR/USD pair eased modestly after attempting a bullish breakout early London, having, however, set a fresh 3-week high of 1.0639, but settled a handful of pips below the 1.0600 threshold. There were some minor macroeconomic releases, including the EU Sentix Investor Confidence Index for March, which reached a 10-year high of 20.7, and US Factory Orders for January, up 1.2% as expected, the second consecutive monthly increase. Nevertheless, investors held in wait-and-see mode ahead of the main events of the week, the ECB monetary policy meeting on Thursday, and the US Nonfarm Payroll report on Friday.

The European Central Bank is expected to remain on hold, as despite inflation has been advancing during the last two months, it has been driven by volatile components such as energy and food, with the underlying inflation still at 0.9%. Still, the Central Bank will reduce its monthly amount of purchases to €60b starting next April, which may arise speculation of tapering, although the most likely scenario is another form of easing planned to 2018.

In the meantime, the pair trades uneventfully above the 1.0565 Fibonacci support. The 4 hours chart shows that technical indicators have lost their upward strength and turned south within positive territory, but are still above previous daily lows, whilst the price is moving back and forth around a bearish 100 SMA, and above a slightly bullish 20 SMA, indicating limited directional strength. The key support is the 1.0520 region, as renewed selling interest below the level could see the pair extending its slide towards 1.0340, this year low, while the upside remains well-limited as long as the price remains below the 1.0700/20 price zone.

Support levels: 1.0565 1.0520 1.0470

Resistance levels: 1.0635 1.0660 1.0710


The USD/JPY pair ends the day unchanged from Friday’s close, although recovering from a daily low of 113.55 achieved at the beginning of the day. As usual, yields differentials are dominating price action, but given that US treasury notes’ yields are pretty much unchanged intraday, the pair is mute. The 10-year benchmark advanced to 2.50% from previous 2.49%, while the 2-year note remained flat. There’s little ahead in Japan this Tuesday, with attention centered in early Wednesday GDP and Trade balance figures. The pair fell briefly below its 100 DMA, but settled above it, although selling interest around 114.50 keeps limiting advances. Shorter term, the 4 hours chart shows that the 100 and 200 SMA converge around 113.25 with no directional strength, reflecting the absence of a clear trend, whilst technical indicators have lost their bearish tone after entering bearish territory, with the RSI indicator already above its mid-line, heading north around 55. Still, the pair needs to advance beyond 114.95, February 15th high, to shrug off at least partially, the bearish tone.

Support levels: 113.50 113.25 112.90

Resistance levels: 114.55 114.95 115.30


After failing to surpass the 1.2300 level, the GBP/USD pair fell towards its recent multi-week low, ending the day not far from last week low of 1.2213. The macroeconomic calendar was scarce in the UK, and will remain so until next Friday, which means attention will center in Brexit woes. This Monday, a spokesman from the government said that Theresa May will not allow the Parliament to vote over her Brexit deal, if such votes means bad trade terms for the UK. On Tuesday, the House of Lords will vote parliamentary veto rights. The pair is biased lower according to technical readings in the 4 hours chart, as the price was unable to advance beyond 1.2300 before finally breaking below a critical Fibonacci support, now resistance at 1.2260. In the same chart, attempts to advance have been contained by a bearish 20 SMA, whilst technical indicators have turned south after failing to overcome their mid-lines, all of which suggests that the pair may extend its decline, particularly on a break below the mentioned six-week low.

Support levels: 1.2215 1.2170 1.2230

Resistance levels: 1.2260 1.2300 1.2345


Gold prices edged lower on Monday, with spot settling around $1,227.20 a troy ounce, as the greenback regained some of its charm after Friday’s setback. Expectations of a March hate hike weighed on the safe-haven metal, despite the sour tone of worldwide equities that started early Asia when North Korea launched some missiles in the Japanese sea, triggering risk aversion. The commodity neared March’s low of 1,222.80, the immediate support, and the daily chart shows that the price remained contained by a horizontal 20 DMA currently at 1,239.25, whilst technical indicators entered bearish territory with nice bearish slopes. Also, the commodity is finishing the day below the 50% retracement of the post-US election decline at 1,230.00, although a break below the mentioned monthly low is required to confirm a steeper decline. Shorter term, the 4 hours chart shows that attempts to recover were rejected by a bearish 20 SMA that already crossed below the 100 SMA, whilst technical indicators head south within negative territory, in line with the longer term perspective.

Support levels1,222.80 1,210.90 1,201.15

Resistance levels: 1,230.00 1,239.25 1,245.50


Crude oil prices saw little action at the beginning of the week, with West Texas Intermediate futures ending the day pretty much unchanged at $53.14 a troy ounce. Oil prices slipped in Asian trading on doubts about Russia’s compliance with the output cut deal, although it later recovered after Iraq said that the OPEC will likely need to extend its output cut into the second half of 2017, and that the country is ready to do so if needed. From a technical point of view, the black gold presents a neutral-to-bearish stance as in the daily chart, as the price remains below its 20 DMA, while technical indicators have turned modestly lower around their mid-lines. In the same chart, however, the 100 DMA heads modestly higher around 51.60, providing a strong dynamic support in the case of further declines. In the 4 hours chart, the 20 SMA has extended its decline below the 100 and 200 SMAs, maintaining its bearish slope, whilst technical indicators have recovered from near oversold readings, losing upward strength around their mid-lines, indicating a limited upward potential.

Support levels: 52.50 51.90 51.40

Resistance levels: 53.70 54.20 54.80


Wall Street closed in the red, with the Dow Jones Industrial Average down 51 points or 0.24%, to 20,954.34. The Nasdaq Composite lost 21 points and settled at 5,849.18, while the S&P shed 0.33%, to 2,375.31. Within the Dow, most components closed lower, with Travelers Cos leading the decline, down 1.22%, followed by JPMorgan Chase that shed 0.92%, as banks were weighed by their European counterparts. Caterpillar led gainers, adding 0.76%, followed by Exxon Mobil that gained 0.47%. US equities were undermined by Fed’s hawkish rhetoric, as investors eye now a downward corrective move following the run to records seen last week. The daily chart for the Dow shows that the positive tone persists, despite the latest slide, as the index remains far above bullish moving averages, whilst the RSI indicator corrected within extreme overbought levels, bouncing now from 70 and the Momentum indicator also resuming its advance within positive territory. In the 4 hours chart, however, the benchmark develops below a modestly bearish 20 SMA, currently at 21,004, whilst the Momentum indicator aims higher within bearish territory and the RSI indicator stands pat in neutral territory.

Support levels: 20,905 20,849 20,800

Resistance levels: 21,017 21,064 21,114

FTSE 100

The FTSE 100 closed the day 0.33% lower at 7,350.12, weighed by a decline in commodities that dragged lower the mining sector, and despite a merge news that sent Standard Life to the top of the list, as the share added 5.68% after the Scotland’s largest insurer agreed to acquire Aberdeen Asset Management Plc, creating one of Europe’s biggest fund managers. Copper led miners lower, with Glencore topping losers’ list, down by 3.47%, followed by Anglo American that shed 2.71%. The banking sector also suffered on Deutsche Bank news, with Royal Bank of Scotland ending the day 2.59% lower. From a technical point of view, the decline has been little relevant, as the index remains well above its moving averages and near record highs, whilst technical indicators have turned modestly lower, but held within positive territory. In the 4 hours chart, the index bounced from a bullish 20 SMA, but the Momentum indicator is entering negative territory, whilst the RSI hovers around 57 with no clear directional strength, indicating a limited upward potential at the time being.

Support levels: 7,352 7,320 7,287

Resistance levels: 7,397 7,420 7,450


European equities closed in the red, with the German DAX down 68 points or 0.57%, to 11,958.40. Deutsche Bank led the way lower across the region, on news that the biggest European lender is facing legal action over foreign currency trading practices, from an US firm. The bank was the worst performer, shedding 3.46%, and leading the sector lower all across the region. ThyssenKrupp followed, down by 1.69%. Only eight components closed higher, with Muenchener being the best performer, up 0.61%. The daily chart for the index shows that, despite the intraday slide, it’s still holding above a bullish 20 DMA at 11,838, while technical indicators retreat within positive territory with limited bearish strength. In the 4 hours chart, the index present an increased bearish potential, as it stands below a still bullish 20 SMA, whilst the Momentum indicator entered bearish territory and the RSI holds around neutral territory, indicating that further declines are likely on a break below 11,920, the daily low.

Support levels: 11,920 11,867 11,816

Resistance levels: 12,001 12,053 12,100

Henyep Capital Markets
Henyep Capital Markets
Risk Warning: Forex and CFDs are leveraged products which carry a high level of risk. It is possible to lose all your capital. These products may not be suitable for everyone and you should ensure that you understand the risk involved. You should ensure you understand all of the risks and seek independent advice if necessary.

Featured Analysis

Learn Forex Trading