Markets have shrugged off the US government shutdown but USD remains close to multi-year lows. US 10-year Treasury yields are holding above 2.64% and seem to be keeping the dollar index above the 90 handle. While the two have been negatively correlated for a while it does look that higher yields are keeping a floor under the USD.

FX and equity markets are pretty well used to political impasse and do not as yet seem to be saying that this will have a material effect on the US economy. And it’s more impasse in Germany, where there are tentative signs of progress but a long way to go before Angela Merkel and the SPD can agree a formal deal.

With governments on both sides of the Atlantic not doing anything, EURUSD has little direction at and remains fairly range-bound. Trading at around 1.2240, the pair is holding onto support at 1.2230, the 23.61% retracement of the January low-to-high rally.

Resistance at $1.23230 is the January 17th 3-year high. A break here calls for a move to $1.25 and then $1.26, the latter of which constitutes the 61.80% retracement of the move from the $1.40 (2014 peaks) to $1.03, the low of Dec 2016.

On the downside, $1.2160 is the key level as this marks the recent lows tested on January 17th and marks both short and long-term Fibonacci support levels. This is both the 50% retracement of the aforementioned move from $1.40 to $1.03; and is the 38.2% retracement of the rally from Jan 10th low around $1.19 to the Jan 17th high of $1.23230. That reversal at $1.2160 suggests we’re in for some consolidation. A break below brings 1.2090 into view.

The ECB meeting this week will be crucial but Mario Draghi is unlikely to offer anything extra for the bulls to latch on to.

After consolidating around $1.38580, the 61.8% retracement of the pre-Brexit high to post-Brexit low, GBPUSD is now past 1.39. Near-term resistance comes at 1.3980, which guards the entry to the sunlit uplands of 1.40. This is the 38.2% retracement of the long-term down move from 1.71 to 1.19.

USDJPY remains range bound with firm support at 110 keeping it aloft ahead of the BoJ meeting. The big task for the central bank is to persuade markets that it’s not about to exit QE any time soon. 110.150 marks the 61.8% retracement of the Sep-Nov rally and seems to be acting as a pretty firm support for USD at the moment.

After 110.150, USD can find support at the 107.30 area, last September’s low. We then see longer-term support on 106.5, the 38.2% retracement of the Oct 2011-May 2015 rally, beyond that the next support is Jun-Sep 2016 lows at 100, the 50% retracement of that move and a mighty round number leg of support for USDJPY.

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