Daily Technical Analysis. Thursday, December 21
The Euro continued to advance on Thursday despite the strengthening of the Dollar against major currencies. With a view to the current upward trend, the pair’s success in breaking the resistance levels close at 1.1870 will enhance optimism and cause further test to 1.1900 levels. A return below the 1.1860 level would temporarily ease the bias.
The Pound fell for a second consecutive day as the Dollar recovered against major currencies, and on the back of continued concerns regarding Brexit negotiations. The US Dollar also found support from higher Yields on Government Bonds to the highest level in nine months, after the House approved the US Tax Cuts, increasing negative pressure on the Pound levels.
The head of the British Central Bank, Mark Carney yesterday, made a number of statements, to indicate that an agreement must be reached on the foundations of an early Brexit, especially amid the prevalence of the outstanding issues.
During the recent movements of the GBPUSD pair, two peaks pattern was formed at the same level, and a negative pattern is also seen to break and stabilize below the support levels at 1.3350. A further decline to 1.3330 will confirm this pattern however, and further confirm the continuation of the bearish path. A break at the resistance levels close at 1.3360, would affect this bearish trend and cause the pair to proceed on a sideways movement.
The Dollar continued to rise against the Yen on Thursday after the Bank of Japan (BOJ) left the Interest Rates and Monetary Policy unchanged.
As the Japanese Economy continues to grow at a good pace, and Inflation is at least moving in the right direction, the pressure on the Bank of Japan to change its policy anytime soon falls, especially as other Central Banks raise Rates and pull Stimulus.
Japanese Government Bonds fell on Thursday, as US Treasury Yields rose to a nine-month high after the House gave final approval for a comprehensive Tax Reform. In contrast, the Bank of Japan’s position has limited the growth of Bond Yields.
In the United States, the Republican-controlled House of Representatives gave A final approval for the biggest reform of US Tax Law in 30 years overnight, sending a $ 1.5 trillion Bill to President Donald Trump for his signature. Many Investors expect the Tax Cuts to help stimulate investment and spending, which in turn will boost the Economy and Inflation.
Technically, a rebound in buying, would reinforce the current bullishness. However, the pair’s success in breaching near resistance levels at 113.45 levels will boost optimism and push the price test to 113.65. Only a return of the price below 113.00, will support a temporary ease of optimism.
The return of selling pressures on the pair’s movement would reinforce the previous bearish trend. A breaking below the support levels near 0.9855 will consolidate the declines and cause a test at the 0.9840 levels. If the price returns above the resistance level at 0.9860, there would be a temporary ease on selling pressure.
Gold prices continued to rise Thursday to a two-week high, despite the recovery of the Dollar against major currencies during the Asian session.
The Tax Reform Law approval had a negative impact on Stocks which have entered a correction given that the event has been priced into the market already. Gold prices are being supported by this drop in Stocks as well as the demand for alternative investments, and the cash levels decline on closed financial positions, ahead of the holiday season.
Despite the recent highs witnessed by the prices, the precious metal still has to break and stabilize above the levels of resistance at 1268 in order to confirm the uptrend.