USDJPY comes off twenty-year highs above 126.00, downside seems limited
The USD index fell back below the 100.00 figure to settle around 99.60 on Thursday, with US Treasury yields losing ground as well. As such, EURUSD plunged to the 1.0810 area before turning positive on the day. The euro extended the pullback early on Thursday to get back above 1.0900 ahead of the ECB meeting. The pair could extend recovery later in the day if the central bank delivers a hawkish tone when speaking about the outlook for its monetary policy. In the immediate term, the common currency needs to overcome the 1.0930-1.0940 zone in order to challenge a slightly descending 20-DMA, today at 1.0970, followed by the 1.1000 mark. However, should the ECB disappoint euro bulls, the pair will fall back to long-term lows and could even derail 1.0800 for the first time since May 2020.
The cable bounced strongly from November 2020 lows registered below 1.3000 on Wednesday. The pair extended its recovery to more than one-week highs, treading water just below the 1.3150 zone during the European trading hours. The local rally is due to a weaker dollar, however, suggesting the selling pressure would reemerge once the USD index bounces back above the 100.00 handle. On the four-hour charts, GBPUSD is now challenging the 200-SMA while the RSI is about to enter the overbought territory, which implies that the bullish potential could be limited from here. Should the prices fail to overcome the 1.3150 region, the pound will likely get back below 1.3100 on a daily closing basis. On the upside, a decisive recovery above the 1.3300 mark would help ease the selling pressure that has been persisting since March 23.
USDJPY briefly exceeded the 126.00 mark to notch twenty-year highs around 126.30 before retreating amid profit-taking as the greenback fell across the board. On Thursday, the pair turned slightly negative on the day after none bullish sessions in a row. Despite the retreat, the RSI stays in the overbought territory, holding around the 78 mark during the European trading hours. USDJPY was last seen trading at 125.36, down 0.23% on the day. The fact that the buck refrains from a deeper correction may signal its readiness to resume the ascent after some consolidation within a slightly lower trading range. On the weekly timeframes, the dollar looks set to finish the sixth bullish week in a row, holding slightly below multi-year peaks registered due to a combination of a weaker yen and a rallying USD.
Elsewhere, gold prices have settled marginally below one-month highs registered around $1,981 as safe-haven demand has waned. Still, the XAUUSD pair refrains from a deeper retreat, staying well above the 20-DMA, suggesting the bullion could regain the upside momentum after some consolidation. In the immediate term, the XAUUSD pair may derive support from the upcoming ECB meeting due later today if the central bank expresses a more hawkish tone. In a wider picture, the yellow metal continues to target the $2,000 psychological level last seen more than one month ago. On the downside, the immediate support now arrives at $1,965, followed by a slightly ascending 20-DMA, today at $1,940. As long as the moving average remains intact, near-term bullish risks continue to persist at this stage. The bullion was last seen changing hands around $1,970, down 0.73% on the day.