Daily Market Update 04/01/2022


 Markets

GBP

GBP/USD has snapped a three-day winning streak on Monday and fell to a daily low of 1.3430 before staging a rebound early Tuesday. The pair was last seen trading a little below 1.3500 and the near-term technical outlook suggests that it could have a difficult time making a decisive move in either direction. The broad-based dollar strength weighed on GBP/USD on the first trading day of 2021. The risk-positive market environment provided a boost to US Treasury bond yields and helped the greenback find demand. The US Dollar Index, which gained more than 0.5% on Monday, is currently consolidating its gains near 96.30, limiting GBP/USD’s rebound for the time being. British Prime Minister Boris Johnson announced on Monday that new measures were not needed in the UK to battle the coronavirus Omicron variant. “Of course, we will keep all measures under review but the mixture of things that we are doing at the moment is I think the right one,” Johnson added and allowed the pound to show some resilience against its peers. Nevertheless, analysts believe the dollar’s valuation is likely to impact GBP/USD’s movements in the short term. Later in the session, the ISM will release the Manufacturing PMI data for December. In case this report points to an ongoing expansion in the manufacturing sector’s activity at a robust pace, risk flows could dominate the markets and allow the dollar to outperform its rivals on the back of rising yields.

EUR

EUR/USD has lost its traction in the second half of the day on Monday and suffered large losses as the greenback regathered its strength to start the new year. The pair has dropped below key levels early Tuesday and the near-term technical outlook points to additional losses.

With American traders returning to markets after the New Year holiday, US Treasury bond yields surged higher. The benchmark 10-year US T-bond yield gained nearly 8% and provided a boost to the dollar. The US Dollar Index pared all of last week’s losses in a single day and caused EUR/USD to fall below 1.1300. In the absence of high-tier macroeconomic data releases, the positive shift witnessed in risk sentiment allowed yields to push higher. Later in the day, the December ISM Manufacturing PMI data from the US will be looked upon for fresh impetus. Investors see the headline figure edging lower to 60.2 from 61.1 in November. A better-than-expected print could help the dollar preserve its strength in the American session.

In the meantime, US stocks futures indexes are trading in the positive territory in the early European session, suggesting that Wall Street’s main indexes could build on Monday’s gains after the opening bell.

USD

In the US later today, the ISM manufacturing survey is due for release as well as the Canadian manufacturing PMI. The US Dollar index (DXY) rejected a move toward the recent low of 95.517 and this level may continue to provide support. An ascending trendline that currently intersects just below 95.00 might also provide support, as well as the pivot point at 94.561 or previous lows at 93.278 and 91.947. The 0.58% rally in the US session has seen it bump against the 21-day simple moving average (SMA) and a decisive break above it could see near term bullish momentum evolve. Potential resistance may lie at the recent highs of 96.906 and 96.938. Despite the significant move, volatility remains subdued, as shown by the relative narrowness of the 21-day SMA based Bollinger Band.

FX Street Technical Analysis – 04th January 2022

Today’s Rates

GBP>EUR – 1.1947

GBP>USD – 1.3497

EUR>USD – 1.1298

GBP>CAD – 1.7205

GBP>AUD – 1.8718

GBP>SEK – 12.206

GBP>AED – 4.9557

GBP>HKD – 10.522

GBP>ZAR – 21.575

GBP>CHF – 1.2397

  Today’s Calendar           

·      USD    ISM Manufacturing PMI(Dec)

  Today’s Highlights

·       Forex Today: Dollar capitalizes on rising yields, eyes on US PMI data

·       EUR/USD Forecast: Door opens for additional losses after Monday’s drop

·       USD/JPY extends the rally to five-year highs, closes in on 116.00

·       GBP/USD to trade in a lower 1.28-1.33 range into 2022 – DBS Bank

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