Technical Analysis

A more pensive mood ahead of European trading today


We’re still very much caught in the cobwebs of the post-CPI drama from yesterday, but already the focus and attention is turning towards the FOMC meeting later today. As all eyes are on the Fed, that is keeping broader markets more tentative for the most part as we look towards European morning trade.

S&P 500 futures are up 12 points, or 0.3%, but that comes after paring a chunk of its gains yesterday with key technical levels holding as noted earlier here. Meanwhile, 10-year Treasury yields are down by roughly 1 bps to 3.49% but remains off the low from yesterday at 3.42%. That said, the drop yesterday is still rather notable though it seems like any further decline in yields will require the Fed’s “seal of approval” today.

Elsewhere, major currencies are little changed for now with the dollar steadying after a massive selloff in reaction to the data. The initial plunge failed to really extend further but there are some notable technical developments to be wary of for some dollar pairs.

EUR/USD is looking to take out key trendline resistance seen around 1.0598, as well as the 38.2 Fib retracement level of its swing lower since the start of last year at around 1.0610. A firm weekly close above the key levels noted will vindicate a push back towards the May high at 1.0786 with eyes on the 1.0800 mark next.

GBP/USD has also managed to breach its August highs at 1.2276-93 and is hoping to secure a breakout push towards 1.2500 next. That will offer some added resistance for the pair from a psychological standpoint before a probable look at 1.3000 in the bigger picture.

AUD/USD also broke to fresh highs since September and is looking towards a test of its 200-day moving average (blue line) next, seen at 0.6900 currently. That will be the key resistance point to watch to see if a further upside break towards 0.7000 will come along or if sellers have the appetite to keep price action pinned in between its key daily moving averages.

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