The Analytical Overview of the Main Currency Pairs on 2023.02.20

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0671
• Prev. Close: 1.0693
• % chg. over the last day: +0.21%

This week’s FOMC minutes may reveal the committee’s preference for a 50 basis point rate hike than originally anticipated. Considering this, the US dollar is well positioned to continue its recovery, especially if there is demand for safe-haven assets. Also, Eurozone inflation data will be released this week, where there could be surprises in the form of new price pressure.

Trading recommendations

• Support levels: 1.0653,1.0618,1.0544
• Resistance levels: 1.0804,1.0906,1.0926,1.0967,1.1017,1.1077

The trend on the EUR/USD currency pair on the hourly time frame is bearish. The price formed a false breakdown zone below the 1.0653 support level and returned to the wide-volatile corridor. The MACD indicator became positive again, and divergence is still observed in many time frames. Under such market conditions, buy trades are best considered from the support level of 1.0653, subject to confirmation on the intraday time frames. Sell deals can be considered from the resistance level of 1.0696, but better with confirmation in the form of a reverse initiative on the lower time frames.

Alternative scenario:

if the price breaks down through the resistance level of 1.0839 and fixes above it, the uptrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.1986
• Prev. Close: 1.2039
• % chg. over the last day: +0.44%

The UK retail sales improved slightly in January, but from a fundamental point of view, the pound’s outlook remains rather gloomy, even though inflationary pressures are starting to ease. The first thing to focus on this week will be PMI data from the manufacturing and service sectors to assess the economy on the back of rising rates. A lot will also depend on FOMC minutes on Wednesday. The minutes may give investors some indication of the appetite for a more significant rate hike at the upcoming Fed meeting in March.

Trading recommendations

• Support levels: 1.1964,1.1930
• Resistance levels: 1.2065,1.2117,1.2267,1.2311,1.2416

From the technical point of view, the trend on the GBP/USD currency pair on the hourly time frame is bearish. But at the moment, the price is trading above the moving averages, with the price forming a false breakdown zone below the 1.1964 level, which will now act as a support zone. The MACD indicator has become positive. Under such market conditions, it is better to look for buy trades on intraday time frames from the support level of 1.1964, but with confirmation. Sell deals are best sought from the resistance level of 1.2065 or 1.2117, but also better with confirmation in the form of a reverse initiative on the lower time frames.

Alternative scenario:

if the price breaks out through the 1.2200 resistance level and fixes above it, the uptrend will likely resume.

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 133.95
• Prev. Close: 134.14
• % chg. over the last day: +0.14%

This week there will be several important economic events that concern the Japanese yen. Firstly, it will be the inflation data, and second — the speech from the new Governor of the Bank of Japan, Kazuo Ueda, regarding his appointment. Despite the fact that Ueda is not a hawkish spokesman, investors expect his tenure to end the control of the yield curve. The only question is when it will happen. Ueda’s speech may provide some clues as to the Bank of Japan’s future monetary policy.

Trading recommendations

• Support levels: 134.04,133.47,132.95,131.43,129.68,129.98,129.19,
• Resistance levels: 135.88

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bullish. The price is steadily moving toward the resistance level of 135.88, leaving small pullbacks to the moving averages. The MACD indicator is in the positive zone, but there are signs of divergence already in several time frames. Buying pressure is present, but the higher it is, the more difficult it is for the price to move. It is better to look for buy deals from the support level of 134.04 or 133.47, but only with confirmation on the lower time frames. Sell deals can be sought from 135.88, but also with additional confirmation.

Alternative scenario:

if the price fixes below the 131.43 support level, the downtrend will be resumed with a high probability.

The USD/CAD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.3450
• Prev. Close: 1.3472
• % chg. over the last day: +0.16%

There will be two key events this week that USD/CAD traders should keep a close eye on. These are Tuesday’s inflation report and Wednesday’s FOMC minutes. The Bank of Canada raised the cost of borrowing by 25 basis points to 4.50% at its January meeting and signaled that its aggressive tightening campaign is over. But policymakers may reconsider the outlook if inflation starts to accelerate again. The consensus forecast is for inflation to fall from 6.3% to 6.1% year-over-year. But much will depend on core inflation data.

Trading recommendations

• Support levels: 1.3468,1.3390,1.3347,1.3295,1.3212
• Resistance levels: 1.3520,1.3554,1.3595

From the point of view of technical analysis, the trend on the USD/CAD currency pair is bullish. The MACD indicator is in the positive zone, but momentum is behind the sellers. Buy trades can be considered from the support of 1.3468, but with additional confirmation on the lower time frames. Above the 1.3520 resistance level, a false breakout zone was formed, so sell deals can be considered from this level, but on the condition of a reverse reaction.

Alternative scenario:

if the price breaks down and consolidates below the support level of 1.3347, the downtrend will likely resume.