The U.S. dollar continued to trade weak with the euro and the Japanese yen held onto it’s gains. Investors bid up the euro and the yen as both the currency's central bank meetings are coming up next week. Hopes of policy normalization from the respective central banks have managed to keep the bullish momentum going.
On the economic front the UK's inflation data released yesterday showed a 3.0% increase in headline CPI. This was in line with expectations and slightly slower than 3.1% increase seen in November. Core CPI was seen rising 2.5%, down from 2.7% increase registered in November.
Looking ahead, the markets will be watching the BoC's monetary policy meeting today. The central bank is widely expected to hike interest rates by 25 basis points at today's meeting.
Earlier in the day, the eurozone final inflation figures will be coming out. Economists expect that consumer rose 1.4% on the headline and 0.9% on the core.
EUR/USD intra-day analysis
EUR/USD (1.2267):The EUR/USD continued to trade above the 1.2250 level which marks the major resistance level on the monthly charts. Price action is expected to remain muted near this level as we expect to see a short-term correction likely to take place. On the 4-hour charts, EUR/USD is seen posting a consolidation. Any short-term declines could see price action limited to the 1.2090 level of support. The minor double top pattern currently taking shape near 1.2280 region could signal the downside correction in prices. This view can shift however if EUR/USD manages to close above 1.2280 on a daily basis.
USD/JPY intra-day analysis
USD/JPY (110.63):The USD/JPY is seen attempting to pare losses as price action fell below the 110.70 handle yesterday. In the short term, the resistance level at 111.00 - 111.88 remains in play, as price action could be seen posting a reversal at this level. USD/JPY could remain range bound below the 111.00 and supported above the 110.00 level. A break out from this range could emerge next week when the Bank of Japan holds its monetary policy meeting.
NZD/USD intra-day analysis
NZD/USD (0.7253): NZD/USD posted declines yesterday but price action has formed an inside bar as a result. This could potentially suggest a correction on a downwards breakdown. The support level 0.7160 remains the immediate level in question as it also marks the breakout from the falling trend line. A retest to this level could indicate new bullish momentum likely to emerge. On the 4-hour chart, NZD/USD could be seen posting declines on a close below 0.7260, targeting the initial level at 0.7160. If the support fails to hold NZDUSD, then we could expect to see further declines taking the kiwi dollar towards 0.6950 support.