Don’t read too much into Monday price action

Today’s report: Don’t read too much into Monday price action

Things ended on a sour note last week, but we’re already seeing a healthy attempt at a turnaround as the new week gets going.

Wake-up call

Chart talk: Technical & fundamental highlights

Choose pair:

EURUSD – technical overview

Setbacks have been well supported below 1.1200, with the market sharply reversing course and pushing back towards the yearly high. A clear break back above 1.1500 will suggest the market could be getting ready to turn back up. Inability to sustain above 1.1500 will keep the pressure on the downside.

  • R2 1.1500 – Psychological – Medium
  • R1 1.1495 - 10 February/2022 high – Medium
  • S1 1.1280 - 14 February high – Medium
  • S2 1.1267 – 2February low – Strong

EURUSD – fundamental overview

The Euro has opened the week with a bid tone, on the back of risk on flow from news of the summit between the US and Russia. The summit is seen reducing the risk of a Russia invasion of the Ukraine. Key standouts on today’s calendar come from German producer prices, German manufacturing PMIs, Eurozone manufacturing PMIs, and UK manufacturing PMIs. But overall, trading conditions will be thinner on account of the long weekend in the US.

EURUSD - Technical charts in detail

GBPUSD – technical overview

The market is in a correction phase in the aftermath of the run to fresh multi-month highs in 2021. At this stage, additional setbacks should be limited to the 1.3000 area ahead of the next major upside extension towards a retest and break of critical resistance in the form of the 2018 high. Back above 1.3835 takes pressure off the downside.

  • R2 1.3662 – 20 January high – Strong
  • R1 1.3644 – 10 February high – Medium
  • S1 1.3487 – 15 February low – Medium
  • S2 1.3434 – 1 February low – Medium

GBPUSD – fundamental overview

The Pound has opened the week with a bid tone, mostly on the back of risk on flow from news of the summit between the US and Russia. The summit is seen reducing the risk of a Russia invasion of the Ukraine. We've also seen GBP demand from the spike in Rightmove house prices. Key standouts on today’s calendar come from German producer prices, German manufacturing PMIs, Eurozone manufacturing PMIs, and UK manufacturing PMIs. But overall, trading conditions will be thinner on account of the long weekend in the US.

USDJPY – technical overview

The longer-term trend is bearish despite the recent run higher. Look for additional upside to be limited, with scope for a topside failure and bearish resumption back down towards the 100.00 area. It would take a clear break back above 117.00 to negate the outlook.

  • R2 116.36 – 4 January high – Strong
  • R1 116.00 – Figure – Medium
  • S1 114.47 – 27 January low – Medium
  • S2 113.47 – 24 January low – Strong

USDJPY – fundamental overview

The Yen has opened the week on a flat note, with the currency seeing decent two way flow. Risk on trade on diffused geopolitical stress around Russia and the Ukraine has been inviting Yen offers, though broad based US Dollar selling has welcomed Yen demand. Key standouts on today’s calendar come from German producer prices, German manufacturing PMIs, Eurozone manufacturing PMIs, and UK manufacturing PMIs. But overall, trading conditions will be thinner on account of the long weekend in the US.

AUDUSD – technical overview

The Australian Dollar has been in the process of a healthy correction following the impressive run towards a retest of the 2018 high in 2021. At this stage, the correction is starting to look stretched and setbacks should be well supported above 0.7000 on a weekly close basis. A weekly close below 0.7000 will force a bearish shift.

  • R2 0.7278 – 20 January high – Strong
  • R1 0.7216 – 17 February high – Medium
  • S1 0.6968 – 28 January/2022 low – Medium
  • S2 0.6921 – July 2020 low – Strong

AUDUSD – fundamental overview

The Australian Dollar has opened the week with a bid tone, on the back of risk on flow from news of the summit between the US and Russia. The summit is seen reducing the risk of a Russia invasion of the Ukraine. Key standouts on today’s calendar come from German producer prices, German manufacturing PMIs, Eurozone manufacturing PMIs, and UK manufacturing PMIs. But overall, trading conditions will be thinner on account of the long weekend in the US.

USDCAD – technical overview

Finally signs of a major bottom in the works after a severe decline from the 2020 high. A recent weekly close back above 1.2500 encourages the constructive outlook and opens the door for a push back towards next critical resistance in the 1.3000 area. Any setbacks should be well supported into the 1.2200s.

  • R2 1.2814 – 6 January high – Strong
  • R1 1.2797 – 28 January high – Medium
  • S1 1.2560 – 26 January low– Strong
  • S2 1.2450 – 19 January low – Medium

USDCAD – fundamental overview

The Canadian Dollar has opened the week with a bid tone, on the back of risk on flow from news of the summit between the US and Russia. The summit is seen reducing the risk of a Russia invasion of the Ukraine. Key standouts on today’s calendar come from German producer prices, German manufacturing PMIs, Eurozone manufacturing PMIs, and UK manufacturing PMIs. But overall, trading conditions will be thinner on account of the long weekend in the US.

NZDUSD – technical overview

Setbacks have intensified in recent weeks with the market trading down to fresh multi-month lows. A recent breakdown below the 0.6700 area opens the door for a drop towards 0.6500 in the sessions ahead.

  • R2 0.6728 – 24 January high – Strong
  • R1 0.6702 – 26 January high – Medium
  • S1 0.6530 – 28 January/2022 low – Medium
  • S2 0.6500 – Psychological – Medium

NZDUSD – fundamental overview

The New Zealand Dollar has opened the week with a bid tone, on the back of risk on flow from news of the summit between the US and Russia. The summit is seen reducing the risk of a Russia invasion of the Ukraine. Key standouts on today’s calendar come from German producer prices, German manufacturing PMIs, Eurozone manufacturing PMIs, and UK manufacturing PMIs. But overall, trading conditions will be thinner on account of the long weekend in the US.

US SPX 500 – technical overview

Longer-term technical studies are in the process of unwinding from extended readings off record highs. The latest breakdown below 4,272 opens the door for the next major downside extension towards 3,500. Back above 4,612 will be required at a minimum to take the immediate pressure off the downside.

  • R2 4612 – 19 January high – Strong
  • R1 4600 – Round Number – Medium
  • S1 4360 – 14 February low – Medium
  • S2 4220 – 24 January/2022 low – Strong

US SPX 500 – fundamental overview

With so little room for additional central bank accommodation, given an already depressed interest rate environment, the prospect for sustainable runs to the topside on easy money policy incentives and government stimulus, should no longer be as enticing to investors. Meanwhile, ongoing worry associated with coronavirus fallout and risk of rising inflation should weigh more heavily on investor sentiment in Q1 2022.

GOLD (SPOT) – technical overview

The 2019 breakout above the 2016 high at 1375 was a significant development, opening the door for fresh record highs and an acceleration beyond the next major psychological barrier at 2000. Setbacks should now be well supported above 1700.

  • R2 1917 – 1 June high – Strong
  • R1 1909 – 21 February high – Medium
  • S1 1753 – 15 December low – Medium
  • S2 1722 – 29 September low – Strong

GOLD (SPOT) – fundamental overview

The yellow metal continues to be well supported on dips with solid demand from medium and longer-term accounts. These players are more concerned about exhausted monetary policy, extended global equities, and coronavirus fallout. All of this should keep the commodity well supported, with many market participants also fleeing to the hard asset as the grand dichotomy of record high equities and record low yields comes to an unnerving climax.

Peformance chart: 30 Day Performance vs. US dollar (%)

Suggested reading

Daily Reports Global FX Insights   LMAX Exchange  

Any opinions, news, research, analyses, prices or other information ("information") contained on this Blog, constitutes marketing communication and it has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Further, the information contained within this Blog does not contain (and should not be construed as containing) investment advice or an investment recommendation, or an offer of, or solicitation for, a transaction in any financial instrument. LMAX Group has not verified the accuracy or basis-in-fact of any claim or statement made by any third parties as comments for every Blog entry.

LMAX Group will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. No representation or warranty is given as to the accuracy or completeness of the above information. While the produced information was obtained from sources deemed to be reliable, LMAX Group does not provide any guarantees about the reliability of such sources. Consequently any person acting on it does so entirely at his or her own risk. It is not a place to slander, use unacceptable language or to promote LMAX Group or any other FX and CFD provider and any such postings, excessive or unjust comments and attacks will not be allowed and will be removed from the site immediately.