The Analytical Overview of the Main Currency Pairs on 2023.02.08

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0725
• Prev. Close: 1.0727
• % chg. over the last day: +0.02%

On Tuesday, Federal Reserve Chairman Jerome Powell reiterated that inflation is slowing but reaffirmed the need for it to continue rising. Morgan Stanley predicts that the US Federal Reserve will end its tightening cycle at the May meeting at 5.00-5.25%, after which it will take a long pause. According to the Fed’s rate monitoring tool, expectations of a rate hike in March are almost entirely factored into prices, while the probability of a rate hike in May jumped from 38% to 69%.

Trading recommendations

• Support levels: 1.0710,1.0650,1.0597
• Resistance levels: 1.0781,1.0838,1.0906,1.0926,1.0967,1.1017,1.1077

The trend on the EUR/USD currency pair on the hourly time frame is bearish. Yesterday the price formed a false breakdown zone, which can now act as a support zone. The MACD indicator is in the negative zone, but sellers’ pressure is weak. Under such market conditions, buy trades are better to be considered from the support level of 1.0710. Sell deals can be considered from the resistance level of 1.0838, but better with confirmation in the form of reverse initiative.

Alternative scenario:

if the price breaks down through the resistance level of 1.0967 and fixes above it, the uptrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.2020
• Prev. Close: 1.2047
• % chg. over the last day: +0.22%

Friday’s US jobs report continues to support the dollar index and, in turn, limits GBP/USD quotes recovery attempts. Market participants estimate a higher Fed peak rate for 2023 than the Bank of England (BoE). Given the problems in the UK economy, the Bank of England is much closer to completing its rate hike cycle. The Bank of England will likely hold another 0.25% hike at its next meeting, but that will not narrow the interest rate differential between the BoE and the US Fed, which is negative for the pound.

Trading recommendations

• Support levels: 1.2000,1.1930
• Resistance levels: 1.2147,1.2202,1.2311,1.2416

From the technical point of view, the trend on the GBP/USD currency pair on the hourly time frame is bearish. The price is trading at the level of the moving averages. A false breakdown zone was formed below the level of 1.2000. The MACD indicator has become positive. Under such market conditions, it is better to look for buy deals on intraday time frames from the support level of 1.2000, but with confirmation in the form of reverse initiative. It is best to look for sell trades after the pullback, as the price has deviated strongly from the moving averages. The best resistance levels are 1.2147 and 1.2202, but it is also better with a confirmation in the form of the reverse initiative.

Alternative scenario:

if the price breaks out through the 1.2416 resistance level and fixes above it, the uptrend will likely resume.

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 132.63
• Prev. Close: 131.07
• % chg. over the last day: -1.19%

Solid payroll data has once again sparked rumors that the Bank of Japan might reconsider its ultra-soft monetary policy after all. Even though it is just a rumor, the Japanese Yen managed to appreciate slightly against the dollar. A lot will depend on who becomes the next governor of the Bank of Japan. A more hawkish politician might reverse the trend in the USD/JPY currency pair, while a more dovish candidate who will continue with the current soft monetary policy will lead to even more weakness in the Japanese currency as the interest rate differential between the Bank of Japan and the US Fed continues to widen.

Trading recommendations

• Support levels: 130.34,129.98,129.19,129.04,128.16
• Resistance levels: 131.58,132.95,133.23

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bullish. The price has corrected to the “discount” area but hasn’t reached the support level, which is why one more decrease in quotes is possible. The MACD indicator has become negative. It is better to look for buy deals from the support level of 130.34, but only with confirmation on the lower time frames. Sell deals can be searched from the resistance level of 131.59, but it is also better with confirmation.

Alternative scenario:

If the price fixes below the support level of 128.16, the downtrend will be renewed with a high probability.

The USD/CAD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.3444
• Prev. Close: 1.3397
• % chg. over the last day: -0.35%

Just two weeks ago, when the Bank of Canada raised its interest rate, analysts were certain that this was the last rate hike. But yesterday, the BoC head dispelled those predictions, pointing out that it was too early to think about lowering rates, and it was not entirely clear if the Bank of Canada had raised rates enough. The Canadian dollar strengthened yesterday on the back of a 4% rise in oil prices. Oil prices were supported by continuing bets on consumption growth in China, as well as the fact that all operations at the Turkish oil export terminal with a capacity of 1 million barrels per day in Ceyhan were halted after a major earthquake. This terminal exports Azeris crude oil to international markets.

Trading recommendations

• Support levels: 1.3333,1.3281,1.3212
• Resistance levels: 1.3442,1.3472,1.3496,1.3520,1.3554,1.3595

From the point of view of technical analysis, the trend on the USD/CAD currency pair is bullish. Yesterday the price formed a false break zone above the level of 1.3442, which will act as resistance. The MACD indicator has become negative, and there is slight seller pressure. Sell deals should be considered from the resistance of 1.3442 in case of a reversal in the intraday time frames since it has already been tested. Buy trades could be considered from the 1.3333 support level, but with additional confirmation in the form of an impulse initiative.

Alternative scenario:

if the price breaks down and consolidates below the support level of 1.3263, the downtrend will likely resume.