Dollar Rebounds on Positive US Data, EURUSD and GBPUSD Charts Show Potential Resistance

Labor market and consumer confidence data in the US, released yesterday, beat estimates, allowing the dollar to stage a comeback. EURUSD retreated into the range of 1.11-1.1150 in line with expectations, GBPUSD also extended its correction, driven by a weak inflation report, dropping to 1.2850.The monthly charts of EURUSD and GBPUSD deserve attention:It's easy to spot potential resistance levels for the current upward trends. The resistance area for EURUSD is in the range of 1.15-1.16, while for GBPUSD it lies between 1.3450-1.355. It’s pretty easy to spot those areas, and in my view, the likelihood of a self-fulfilling prophecy playing out (the key idea behind technical analysis) is high. Buyers will likely prefer to take profits upon reaching those levels, fearing a backlash, while sellers will jump in, expecting buyers to temporarily stay out of the market. For this scenario to unfold, prices must at least reach these areas. Therefore, the current dollar rebound should be considered intermediate – it must return to a downward trajectory for a while so that we can observe how classic patterns of technical analysis work out. As I mentioned earlier, on hourly charts for EURUSD and GPBUSD, the areas where the downward correction is likely to peter out are 1.11-1.1120 and 1.28-1.2820.Yesterday, the Philly Fed report also provided some support for the dollar. Despite a "red" value for the overall manufacturing activity index (-13.5 against a forecast of -10 points), the leading components of the index performed well – the expected overall activity index jumped from -10.3 to 12.7 in June, and expectations for future orders reached 38.2 points. Price pressure indicators in the sector also showed positive dynamics, maintaining their values below long-term averages. Today's inflation report in Japan caused the yen to plummet, with USDJPY surging more than 1%. Despite efforts by the Bank of Japan to curb borrowing costs to boost inflation through investments and a cheaper yen, consumer prices grew at a slower pace than expected in June – 3.3% versus a forecast of 3.5%. The last yen downward rebound occurred at the 145 level, which was also the point where the Japanese central bank announced currency intervention last time. It's also the upper boundary of the current upward channel. The next target could be at the same level where the ascending corridor line intersects – at 146.80, as shown in the chart below: