The Analytical Overview of the Main Currency Pairs on 2023.01.16

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0843
• Prev. Close: 1.0831
• % chg. over the last day: -0.39%

European Central Bank member Martins Kazaks rejects investors’ view that the ECB will cut interest rates by the end of this year, saying a deep recession will be needed to lower borrowing costs. Finland’s Central Bank governor, Olli Rehn, and Spain’s Pablo Hernandez de Dos also called for the ECB to raise rates significantly in upcoming meetings. Money markets expect the ECB to raise the bank deposit rate by nearly 150 basis points by summer, starting at 50 basis points at each of the ECB’s February 5 and March 16, 2023 meetings.

Trading recommendations

• Support levels: 1.0835,1.0710,1.0650,1.0597,1.0535,1.0497,1.0480
• Resistance levels: 1.0875

The trend on the EUR/USD currency pair on the hourly time frame is still bullish. The price is trading above the moving averages but has reached a strong resistance level. The MACD indicator is in the positive zone, but there are signs of divergence, which means that price growth is limited, and a correction should be expected to find good entry points. Under such market conditions, buy trades are best considered from the support level of 1.0835 with confirmation on intraday time frames. Sell deals can be considered from the daily resistance level of 1.0875, but better with a confirmation in the form of a reverse initiative or a false breakout.

Alternative scenario:

if the price breaks down through the support level of 1.0700 and fixes below it, the downtrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.2206
• Prev. Close: 1.2229
• % chg. over the last day: -0.19%

Friday’s UK GDP data for December unexpectedly showed an increase of 0.1% (forecast -0.2%). But manufacturing data failed to meet expectations and showed a decline again. The UK economy certainly does not look suitable for higher borrowing costs, and rising interest rates for the pound sterling is an unsustainable fundamental factor. This week, the UK will publish labor market data as well as the inflation rate. This data is taken into account by the Bank of England to regulate monetary policy.

Trading recommendations

• Support levels: 1.2226,1.2080,1.2000,1.1928,1.1875,1.1684,1.1476,1.1418
• Resistance levels: 1.2302,1.2431,1.2519

From the technical point of view, the trend on the GBP/USD currency pair on the hourly time frame is bullish. The price is trading above the moving averages again. The MACD indicator is in the positive zone, but divergence in several time frames will restrain the upward momentum. Under such market conditions, it is better to look for buy trades on intraday time frames from the support level of 1.2286, but with confirmation. Sell trades are best sought from the resistance level of 1.2302 but also better with confirmation in the form of a false breakout or a change of structure on the lower time frames.

Alternative scenario:

if the price breaks down through the 1.2080 support level and fixes above it, the downtrend will likely resume.

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 129.24
• Prev. Close: 127.84
• % chg. over the last day: -1.09%

Japan’s 10-year bond yield exceeded the new 0.5% ceiling on Friday for the first time since the December 20 meeting, prompting the Bank of Japan to spend an additional 3.2 trillion yen ($24.9 billion) to buy fixed-rate bonds. The Bank of Japan will hold a monetary policy meeting this week. Citigroup’s economists expect the bank to give up control of the yield curve entirely. Inflation data due out on Friday may also spur investors to speculative action. Volatility on the currency pair with the Japanese Yen will be higher this week.

Trading recommendations

• Support levels: 127.08,126.19
• Resistance levels: 128.93,129.65,131.12,132.36,133.23,134.45,135.88,137.03

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bearish. The price is trading below the moving averages. The MACD indicator has become negative again, but there are the first signs of oversold. Also, on the higher time frames, there is a divergence. It is best to look for buy trades from the support levels of 127.08, but only with intraday confirmation and with short targets. Sell deals can be searched for from the resistance level of 128.93 under the condition of a reverse reaction or false breakout.

Alternative scenario:

If the price fixes above the resistance level of 132.36, the uptrend will be renewed with a high probability.

The USD/CAD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.3369
• Prev. Close: 1.3394
• % chg. over the last day: +0.19%

On the prospect of the Chinese economy opening and the dollar falling last week, oil posted its biggest weekly gain since October. This has allowed the Canadian dollar to strengthen significantly over the past five trading days. A weaker dollar tends to boost demand for oil, making it cheaper for buyers holding other currencies. Analysts are now looking at the Chinese numbers, pointing to increased demand for oil, which with the current supply, could push the price even higher. On the one hand, it is positive for the Canadian dollar. On the other hand, a rise in oil prices by itself could eventually lead to higher inflation in the country.

Trading recommendations

• Support levels: 1.3354,1.3212
• Resistance levels: 1.3492,1.3513,1.3561,1.3594,1.3632,1.3700

From the point of view of technical analysis, the trend on the USD/CAD currency pair is bearish. The price is trading in a wide price corridor. The MACD indicator is in the negative zone with signs of divergence. Under such market conditions, buy trades should be considered from the support level of 1.3354, but only with short targets and confirmation. Sell deals are best to look for on intraday time frames from the resistance level of 1.3389, but with confirmation in the form of a reverse initiative on the lower time frames.

Alternative scenario:

if the price breaks out and consolidates above the resistance level of 1.3500, the uptrend will likely resume.