- USD/JPY bounces to around 115.50 after defending 115.00.
- Russia-Ukraine geopolitical risks continue to remain a threat.
- Downside appears cushioned amid a bunch of healthy support levels.
USD/JPY is consolidating Friday’s sell-off around mid-115.00s, trying to find the conviction to extend the recovery momentum.
Even though the risk sentiment has somewhat recovered, worries over a potential Russia-Ukraine war persist, which keeps any renewed upside in the US Treasury yields limited. This, in turn, could stem USD/JPY’s rebound.
Bulls may also find comfort from an increasing case for rising global rates, as inflation soar worldwide. The January Fed meeting’s minutes are likely to ramp up expectations for aggressive tightening by the world’s most powerful central bank.
Meanwhile, the Bank of Japan (BOJ) successfully defended its key bond yield target on Monday, as attention turns towards the Japanese growth numbers due on Tuesday.
In the meantime, the speech from St. Louis President James Bullard will be closely eyed for fresh hints on the Fed’s rate hike plans.
USD/JPY: Technical outlook
USD/JPY’s daily chart shows that the price found buyers well above the bullish 21-Daily Moving Average (DMA) at 114.79.
Also, bulls remain hopeful as the spot managed to defend the 115.00 level, as the 14-day Relative Strength Index (RSI) continues to hold above the midline.
On the upside, daily closing above 116.00 is needed to retest Friday’s high of 116.17, above which the critical horizontal trendline resistance at 116.34 will come into play.
EUR/USD FACES SOLID SUPPORT AROUND 1.1300 – UOB
FX Strategists at UOB Group noted further downside in EUR/USD should meet decent support in the 1.1300 area in the near term.
Key Quotes
24-hour view: “The sharp drop in EUR during late NY hours to 1.1328 came as a surprise. While the rapid decline appears to be running ahead of itself, EUR could dip 1.1328 from here. That said, the major support at 1.1300 is unlikely to come into the picture. Resistance is at 1.1385 followed by 1.1410.”
Next 1-3 weeks: “Last Friday (11 Feb, spot at 1.1420), we highlighted that the recent upside risk has dissipated and we expected EUR to trade between 1.1340 and 1.1500. We did not anticipate the rapid manner by which EUR dropped below 1.1340 (low of 1.1328). Downward pressure has increased, albeit not by much. There is room for EUR to edge lower but any weakness is likely limited to a test of 1.1300. On the upside, a breach of the ‘strong resistance’ level, currently at 1.1440, would indicate that the downside risk has dissipated.”
GOLD FUTURES: RECOVERY HAS FURTHER LEGS TO GO
Open interest in gold futures markets rose for the fifth consecutive session on Friday, this time by around 16.2K contracts considering flash data from CME Group. Volume followed suit and went up for the second straight session, now by nearly 5K contracts.
Gold now targets $1,877
Friday’s strong upside in the precious metal was amidst rising open interest and volume, leaving the door open to the continuation of the uptrend in the very near term and with the immediate target at the November 2021 high at $1,877 per ounce troy.
PBOC IS UNLIKELY TO ALTER LPR BUT MAY ROLLING OVER MEDIUM-TERM LOANS – REUTERS POLL
The People’s Bank of China (PBOC) is unlikely to deliver a second consecutive cut to its lending rate, a Reuters poll of 22 financial institutions.
Key findings
“Nineteen out of 22 financial institutions surveyed said they expect the People's Bank of China (PBOC) to issue 200-billion-yuan ($31.45 billion) in maturing medium-term lending facility (MLF) loans on Tuesday, matching the amount maturing on Friday.”
“The remaining three said they expect issuance to slightly exceed the value of loans maturing this week as an indication of the PBOC's easing stance.”
“All survey respondents said they expect the MLF rate to remain stable”.
GBP/USD: FURTHER CONSOLIDATION REMAINS ON THE CARDS – UOB
In opinion of FX Strategists at UOB Group, GBP/USD is still seen navigating within the 1.3450-1.3645 range in the short-term horizon.
Key Quotes
24-hour view: “Last Friday, we held the view that GBP “could weaken but a clear break of 1.3500 is unlikely”. GBP subsequently dropped to 1.3515, rebounded quickly to 1.3609 before easing off to close unchanged at 1.3461. The choppy price actions have resulted in a mixed outlook and GBP is likely to trade sideways for today, expected to be between 1.3520 and 1.3600.”
Next 1-3 weeks: “Our view from last Friday (11 Feb, spot at 1.3550) still stands. As highlighted, GBP is likely trade between 1.3450 and 1.3645 for now.”
