The Analytical Overview of the Main Currency Pairs on 2023.03.31

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0842
• Prev. Close: 1.0905
• % chg. over the last day: +0.58%

Inflation in European countries is beginning to decline. In Spain, the consumer price index fell sharply from 6% to 3.3% year-over-year. In Germany, inflation fell from 9.2% to 8.3% y/y. Today, inflation data will be released by France (forecast 6.3% to 5.5% y/y) and Italy (forecast 9.1% to 8.2% y/y), and the total figure for the Eurozone will be published afterward. Analysts forecast a decline in consumer prices in Europe from 8.5% to 7.1%, but the main focus will be on core inflation data (excluding food and energy prices). A decline in core inflation may temper the ECB’s aggressive stance. For now, the ECB plans to raise interest rates by 0.5% in May, but lower inflationary pressures in March and April may force ECB officials to lower the rate hike to 0.25%.

Trading recommendations

• Support levels: 1.0881,1.0770,1.0680,1.0519,1.0482
• Resistance levels: 1.0924,1.1017

The price is trading above the moving averages, and volatility is declining ahead of important news on the PCE price index. The MACD indicator is in the positive zone but with signs of divergence. It is better to buy from the support level of 1.0881 or 1.07700, but only with confirmation. It is worth buying after confirmation on the intraday time frames in the form of a change in the structure. Sell deals can be considered from the resistance level of 1.0923 in case of a false breakout.

Alternative scenario:

if the price breaks down through the support level of 1.0680 and fixes below it, the downtrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.2311
• Prev. Close: 1.2388
• % chg. over the last day: +0.63%

UK GDP data for the quarter will be released today. GDP is expected to show no growth (0%), with annualized GDP growth down to 0.4% from 1.9%. Last quarter Britain’s economy showed a contraction of 0.2%, so if the data is also negative today, the UK will officially enter a technical recession, which is calculated by two consecutive negative quarterly GDP numbers. This will be negative for the British pound, even with the UK about to join the Trans-Pacific Partnership Agreement (CPTPP).

Trading recommendations

• Support levels: 1.2343,1.2266,1.2178,1.2112,1.2009,1.1963,1.1929,1.1843
• Resistance levels: 1.2415,1.2519

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 but has reached the resistance level of 1.2415. The MACD indicator is in the positive zone, but there is a divergence in higher time frames. Under such market conditions, it is best to buy after a pullback to the nearest support level of 1.2343 or 1.2266. Sell trades are better to be done in the intraday time frames from the resistance level of 1.2415, with a confirmation in the form of a false breakout.

Alternative scenario:

if the price breaks down through the 1.2178 support level and fixes below it, the downtrend will likely resume.

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 132.80
• Prev. Close: 132.68
• % chg. over the last day: -0.09%

In Japan, the Tokyo Consumer Price Index, considered a leading indicator for overall inflation, declined from 3.3% to 3.2% year-over-year last month. Retail sales showed an increase from 5.0% to 6.6%, and industrial production rose by 4.5% for the month of March. Meanwhile, the unemployment rate rose from 2.4% to 2.6%. Overall, these are positive macro statistics, even though the labor market is weak. Falling inflation, rising output, and rising retail sales point to a solid economic condition. The Bank of Japan does not need to change its monetary policy at this stage. It is already a negative factor for the yen as the interest rate differential between the BoJ and other leading central banks is not in favor of the Japanese currency.

Trading recommendations

• Support levels: 131.91,130.49,129.80
• Resistance levels: 133.00,133.75,135.16,136.07,137.91

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bearish, but there are all the prerequisites for a reversal. At the moment, the price is trading above the moving averages, and there is buying pressure. But the MACD indicator is overbought, and there is a divergence. It is better to look for buy deals from the support level of 132.47 or 131.92, but only with confirmation on the lower time frames. Sell positions can be sought from the resistance level of 133.04, but also with additional confirmation in the change of structure on the intraday time frames.

Alternative scenario:

if the price fixes above the 133.47 resistance level, the uptrend will be resumed with a high probability.

The USD/CAD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.3557
• Prev. Close: 1.3522
• % chg. over the last day: -0.25%

The Canadian dollar continued to strengthen on Thursday amid weakness in the dollar index and at the expense of rising oil prices. Oil prices continue to be supported by a lack of Iraqi exports from the Turkish port of Ceyhan, which deprives the world market of about 400,000 barrels of oil a day. Markets are still expecting a recovery in oil demand from China, but the latest data showed a decline in manufacturing activity.

Trading recommendations

• Support levels: 1.3554,1.3515
• Resistance levels: 1.3616,1.3645,1.3694,1.3722,1.3786,1.3814,1.3862

From the point of view of technical analysis, the trend on the USD/CAD currency pair is bearish. The price is trading below the moving averages. The MACD indicator is oversold, and there are signs of divergence, which suggests that an upward correction should be expected in the near future. Under such market conditions, it is better to buy from the support level of 1.3515 but with a confirmation in the form of a false breakdown and a change of the structure on the lower time frames. Sell deals can be sought from the resistance level of 1.3568, but only with confirmation in the form of a reverse initiative.

Alternative scenario:

if the price breaks out and consolidates above the resistance level of 1.3645, the uptrend will likely resume.