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Dollar Soft in Quiet Markets, European Majors in Control

The forex markets are rather quiet in Asia, with major pairs and crosses stuck inside yesterday’s tight range. Risk sentiments are mixed. While US indexes extended the record runs overnight, Asian index are struggling, as dragged down by extended selloff in Hong Kong. Overall, European majors are generally firmer together with Yen. On the other hand, Dollar and commodity currencies are soft.

Technically, we’d pay attention to whether Dollar would turn weaker leading up to FOMC policy decision. In particular, break of 110.00 minor support in USD/JPY would suggest completion of rebound from 109.05. Break of 1.1880 resistance in EUR/USD would also indicate short term bottoming. At the same time, Gold is holding on to 1791.45 support with some resilience. Break of 1833.91 resistance will resume the rebound from 1750.49.

In Asia, at the time of writing, Nikkei is up 0.50%. Hong Kong HSI is down -1.03%. China Shanghai SSE is up 0.14%. Singapore Strait Times is up 0.53%. Japan 10-year JGB yield is up 0.0051 at 0.022. Overnight, DOW rose 0.24%. S&P 500 rose 0.24%. NASDAQ rose 0.03. 10-year yield dropped -0.010 to 1.276.

EUR/CHF breaking to downside, EUR/GBP soft

Euro has been trading as the relatively weaker European majors since ECB reaffirmed it dovish stance last week. The new forward guidance indicated that inflation must projected to be on target 12-18 months away before consideration of rate hike. At the same time, there is no sign of tapering the PEPP program yet and it’s going to last until March next year anyway.

EUR/CHF’s breach of 1.0802 temporary low suggests that recent decline is resuming. Rejection by 4 hour 55 EMA affirms near term bearishness too. Fall from 1.1149 is on track to 1.0737 cluster support (61.8% retracement of 1.0505 to 1.1149 at 1.0751). Downside momentum is so far capped by the medium term channel support. We’ll see if EUR/CHF could accelerate further. below the channel.

EUR/GBP also staged a sharp reversal after spiking to 0.8668 last week. The lack of deterioration in coronavirus infections and deaths was a good sign for the UK, after the so called “Freedom Day”. It’s now possible that corrective pattern from 0.8718 would take another take through 0.8502 support before completion. That is, Euro could continue to underperform Sterling for a little while.