The Analytical Overview of the Main Currency Pairs on 2023.01.20

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0789
• Prev. Close: 1.0830
• % chg. over the last day: +0.38%

The ECB is still determined to keep raising rates by 50 basis points in its next meetings. At the same time, there is a growing possibility that the ECB will cut its bond holdings faster. The ECB’s December monetary policy report showed that many policymakers were initially in favor of raising the ECB’s key interest rates by 75 basis points because inflation was expected to be too high. Given the latest Eurozone inflation data, analysts are leaning toward the ECB raising rates by 50 basis points in February and March and then another 25 basis points in May, after which Europe’s Central Bank will pause for a few months.

Trading recommendations

• Support levels: 1.0780,1.0710,1.0650,1.0597,1.0535,1.0497,1.0480
• Resistance levels: 1.0846,1.0867

The trend on the EUR/USD currency pair on the hourly time frame is still bullish. The price is forming a price corridor and is trading at the level of the moving averages. The MACD indicator has become inactive, while signs of divergence persist. Under such market conditions, buy trades are best considered from the support level of 1.0780, with confirmation on intraday time frames in the form of a false breakout of the level. Sell deals can be considered from the resistance level of 1.0846, but better with confirmation in the form of a reverse initiative.

Alternative scenario:

if the price breaks down through the support level of 1.0710 and fixes below it, the downtrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.2345
• Prev. Close: 1.2390
• % chg. over the last day: +0.36%

Demand for the dollar is generally declining as markets begin to price in the scenario that the Federal Reserve is at the end of its tightening cycle, while the British pound and the euro still have “room” as the central banks in England and the ECB plan to continue raising interest rates. The economic situation in the UK is worse than in the Eurozone. The strong labor market is a positive factor for the Bank of England in the tightening cycle. But high inflation has left manufacturing activity, the service sector, and the real estate market already on the verge of recession. Economists expect the Bank of England to raise its key interest rate from 3.5% to 4% at its meeting in February.

Trading recommendations

• Support levels: 1.2296,1.2220,1.2145,1.2080,1.2000,1.1928,1.1875,1.1684
• Resistance levels: 1.2383,1.2446,1.2519

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 levels of the moving averages. The MACD indicator is in the positive zone, but the presence of divergence and the daily resistance is still limiting the further growth of quotes. Under such market conditions, it is better to look for buy trades on intraday time frames from the support level of 1.2296, but with confirmation. Sell trades are best sought from the resistance level of 1.2383 but also better with confirmation 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: 128.88
• Prev. Close: 128.42
• % chg. over the last day: -0.36%

Japan’s nationwide core consumer price index rose from 3.7% to 4.0% in annual terms, a 41-year high. While well below the still exorbitant levels of inflation in the United States, the United Kingdom, and elsewhere, the figure is well above the Bank of Japan’s 2% inflation target. Rising inflation in Japan only adds to the likelihood that the central bank will reverse the policy to a tightening cycle in the spring.

Trading recommendations

• Support levels: 128.16,127.53,126.19
• Resistance levels: 130.05,131.34,132.37,132.95,133.23,134.45,135.88

From the technical point of view, the medium-term trend on the currency pair USD/JPY is still bearish. The price did not manage to consolidate above the priority level, but within the day, buying pressure will prevail. The MACD indicator is positive again. It is best to look for buy trades from the support level of 128.16, but only with confirmation on intraday time frames. Sell positions can be searched from the resistance level of 130.05, provided that there is a reverse reaction.

Alternative scenario:

If the price fixes above the resistance level of 131.34, the uptrend will be renewed with a high probability.

The USD/CAD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.3485
• Prev. Close: 1.3466
• % chg. over the last day: -0.14%

The Canadian dollar is a commodity currency and is highly correlated with instruments such as the dollar index and oil prices. Oil prices increased about 1% on Thursday despite rising inventories. The main trigger for the rise is optimism about China’s opening. Oil demand in China is up nearly 1 million BPD from the previous month. The International Energy Agency said that global oil demand might reach a record high in 2023 as China lifts blockages and restrictions. Considering the current supply levels in the market, it will put upward pressure on oil prices, which will strengthen the Canadian dollar.

Trading recommendations

• Support levels: 1.3445,1.3396,1.3212
• Resistance levels: 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 close to changing to a bullish one. The MACD indicator has become positive and buying pressure prevails during the day. Under such market conditions, sell transactions can be considered from the resistance level of 1.3513, but with additional confirmation in the form of a false breakout, as the level has already been tested. Buy deals should be considered from the support level of 1.3445 or 1.3396, but only with short targets and confirmation.

Alternative scenario:

if the price breaks out and consolidates above the resistance level of 1.3513, the uptrend will likely resume.