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GBP/USD is upward oriented. The technicals remain positive. Hourly support is given at a distance of 1.3458 (11/01/2018 low) while strong resistance at 1.3940 (17/01/2018 high) is being monitored.

The long-term technical pattern is reversing. The Brexit vote had paved the way for further decline but the pair is now moving upward. A long-term support given at 1.1841 (07/10/2017 low) and a strong resistance at 1.5018 (24/06/2016 high) are identified

EUR/USD remains stable. The pair is now forming a rectangle and is maintained at a resistance given at 1.2325 (17/01/2018 high) and hourly support at 1.2165 (17/01/2017 low). The technical structure suggest further short-term upside moves.

In the longer term, the momentum is turning largely positive. We favor a continued bullish bias. Key resistance is holding at 1.2856 (15/10/2014 high) while strong support lies at 1.0341 (03/01/2017 low).

Bank of Japan under pressure to normalise

The Bank of Japan will keep its policy unchanged for now. Positive price momentum gives the BoJ coverage to keep policy unchanged, despite speculation of premature normalization. However, the BoJ is clearly running out of time, and the market know this. While we can argue the data, the reality is that sustaining easing policy indefinitely is not an option.

In its Outlook for Economy and Pricing, both inflation and growth forecasts are expected to be revised higher. Global economic recovery will support Japan's GDP growth. Consumer inflation should gradually improve (on Friday, Japan reported a core CPI increase to 0.5% from 0.2% in November), yet it remains below the 2% target. Meanwhile, the effectiveness of policy action and communication in weakening the Yen is decelerating. A rapid rise in US yields has uncharacteristically failed to boost USD/JPY appreciation. Moreover, lingering geopolitical risk (highlighted by US government shutdown) and potential disappointment in China growth could trigger JPY appreciation.

Long US shutdown unlikely

Monday promises to be stormy in the Senate. The long and arduous negotiations between Republicans and Democrats on Friday have ended to a zero point with regard to the Government budget validation. The main source of the issue being the withdrawal of the Daca program that protected young migrants called 'Dreamers' against deportation. Consequences are drastic as 700'000 government workers won't be working on Monday and the coming week until the bill is finally signed! Remaining government services and deemed as 'vital' are for instance in air traffic control, domestic safety (e.g. military), national security and law enforcement agencies. However according to the Senate majority leader Mitch McConnell, the Republicans would be supporting a consent to support an immigration reform under the condition that Democrats agree to the government short-term financing bill until February 8th or longer, a rather temporary solution that should avoid additional damages that could cost billions.

From our perspective, the scenario of a long-lasting shutdown like the 16-day long that occurred during the 'Obamacare' healthcare reform negotiation and cost USD 24 billion according to Standard & Poor's or the 27-day shutdown of 1995 regarding the health insurance program that concerns the US aging population are less likely. We remain confident that short-term bills remain passage solutions until all parties finally get an arrangement on the 'Dreamers' controversy.

EUR/USD

Current level - 1.2243

Nothing interesting here, as the pair remains caught in a tight range trading below 1.2300 and I favor a dip to 1.2160 before renewal of the general rise beyond 1.2320.

USD/JPY

Current level - 110.77

I favor the idea, that current slide after 111.50 is the second part of the consolidation phase above 110.20 and another rise should follow, towards 111.70 zone. A break through 110.20 lows will signal, that the corrective pattern is complete and will provoke a slide towards 109.50.

GBP/USD

Current level - 1.3896

The consolidation pattern is still underway and there is a chance of a dip to 1.3800 area before break beyond 1.3940 peak. The latter will expose 1.4000 sentiment area.

Bears are taking a breather on Monday after last Thu/Fri action being firmly in red, as the dollar regained footing after being hit by US government shutdown.

However, recovery attempts from session low at 110.49 (also low of last Friday) were limited under 111.00 barrier and keep intact bearish bias for renewed attack at key supports at 110.15/00 (Fibo 61.8% of 107.31/114.73 rally / psychological support).

Bank of Japan's policy meeting is coming in focus (due tomorrow) with the central bank expected to maintain its ultra-easy policy, which would disappoint some trader who expect some shift in the policy.

Favored near-term scenario sees eventual break through 110.15/00 pivots (close below 110.15, Fibo 61.8% of 107.31/114.73 ascend is needed to generate strong bearish signal) and fresh acceleration towards next target at 109.06 (Fibo 76.4%).

Falling 10 SMA continues to pressure and marks resistance at 111.11, guarding upper pivots at 111.48 (last Thu recovery peak) and 111.70 (200SMA).

Res: 110.91, 111.11, 111.48, 111.70
Sup: 110.49, 110.15, 110.00, 109.54

The common European currency has reached a dominant support line against the New Zealand Dollar. The encounter has resulted in a rebound.

After reaching the weekly pivot point level at 1.660, the rebound continued in accordance with the most dominant channel. A new pattern has been mapped and the common European currency is likely to continue a short-term surge.

Furthermore, technical indicator of the 100 – hour simple moving average is providing support at 1.677 at the time of this analysis.

The US Dollar has continued to trade in the same direction against the Swiss Franc since late December 2017.

The most dominant channel's support has been moved lower. Secondly, a medium-term pattern has been mapped. In addition, the medium term channel continued to move south after testing weekly pivot point level at 0.961.

Regarding the short-term future, the medium term channel is likely to be narrower until it breaches the dominant channel and finds support at 0.947.Meanwhile, technical indicators are still in favor of a fall because the 55 – hour, 100 – hour and 200 – hour SMAs are located above the exchange rate.

EUR/USD’s reversal from the 1.2285 mark mid-Friday confirmed the formation of a new descending channel. The increasing strength of the bearish sentiment was apparent later in the day when the Euro tried to surpass a significant support area formed by the 100– and 55-hour SMAs and the monthly R2 circa 1.2225. Any attempt to edge lower was interrupted when the pair opened 54 pips higher in this session which was followed by a re-test of the aforementioned support. This day is quiet in terms of fundamentals; however, political events, especially the US turmoil over government shutdown, are likely to drive the market. Technical indicators confirm that there is still some potential south, possibly down to the 200-hour SMA and the weekly S1 at 1.2150, that could be realised today.

Friday's trading session ended with a 39-pip loss for the GBP/USD exchange rate. Further decline below the 1.3850 mark was limited by the combined support of the 55– and 100-hour SMAs. Even though the Sterling breached the prevailing short-term channel, it remained near the former until early Monday.

Technical indicators suggest that the price could fluctuate without any notable leaps today. However, it is more likely that the Pound tries to regain some of loses which occurred on Friday. A possible upside target could be the weekly R1 at 1.3959, as the upper boundary of a longer-term ascending channel is likewise located near this mark.

The bearish sentiment prevailed in the market on Friday. Despite breaching the 100-hour SMA, the US Dollar failed to move below this line, thus remaining in the 110.50/90 area by Monday morning. As apparent on the chart, the northern barrier is provided by the 200-, 100– and 55-hour SMAs and the weekly PP circa 110.80. It is unlikely that this strong resistance cluster is breached, thus pointing to a possible decline in this session. The daily low could be the monthly S2 and the weekly S1 near the 110.20 mark. By and large, political events in the United States are expected to be a strong driving force today, and it therefore could cause sudden fluctuations. However, the psychological 111.00 mark should still hold strong.