The Analytical Overview of the Main Currency Pairs on 2023.02.21

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0684
• Prev. Close: 1.0684
• % chg. over the last day: 0.0%

The Federal Reserve and the European Central Bank reiterated their commitment to curbing inflation through additional rate hikes. On these expectations, the EUR/USD quotes have no clear dynamics, and this situation will persist at least until Wednesday, when the minutes of the January FOMC meeting will be published. Yesterday the latest data showed that consumer sentiment in the Eurozone increased to the highest level in a year, which is a sign of sustainability and a growing hope that the region can avoid recession this year. Investors should pay attention to the ZEW sentiment data for Germany today, which will give a hint on how the region’s largest economy will behave over the next six months.

Trading recommendations

• Support levels: 1.0653,1.0618,1.0544
• Resistance levels: 1.0704,1.0804,1.0906,1.0926,1.0967,1.1017,1.1077

The trend on the EUR/USD currency pair on the hourly time frame is bearish. The price formed a false breakdown zone below the level of 1.0653 and returned to the wide-volatile corridor. The MACD indicator has become inactive, but the 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 1.0704, but better with confirmation in the form of a reverse initiative on the lower time frames or a false breakout.

Alternative scenario:

AAlternative 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: 1.2024
• Prev. Close: 1.2039
• % chg. over the last day: +0.12%

Overall, sterling remains under pressure against the two major currencies, largely influenced by the ECB’s and the Fed’s aggressive behavior against the Bank of England (BoE). Recent UK economic data has reduced the likelihood of further rate hikes. Many Bank of England officials believe the impact will be more severe, especially in the housing market, since most mortgages in the UK are under term contracts. Also, core inflation remains resilient due to wage pressures.

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. At the moment, the price is trading at the level of the moving averages and forming a narrow flat. Last week the price formed a false breakdown zone below the level of 1.1964, which will now act as a support zone. The MACD indicator has become inactive. Under such market conditions, it is better to look for buy deals on intraday time frames from the support level of 1.1964, but with confirmation. Sell trades 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: 134.21
• Prev. Close: 134.25
• % chg. over the last day: +0.03%

Japan’s finance minister said Friday that the new governor of the Bank of Japan (BoJ) should lower inflation to target levels and support economic growth and wage growth without touching the issue of monetary policy changes. It is becoming clear that hopes for monetary policy changes under the new governor are greatly exaggerated. Thus, the Japanese yen might again come under pressure before mid-spring due to the soft policy and the strength of the dollar index.

Trading recommendations

• Support levels: 134.03,133.47,132.95,131.43,129.68,129.98,129.19
• Resistance levels: 135.88

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bullish. At the moment, the price is trading in a narrow corridor at the level of the moving averages. The MACD indicator has become inactive, but signs of divergence are still observed on several timeframes. Buying pressure is present, but the higher it is, the harder it is for the price to advance. It is better to look for buy trades 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 the 135.88 level, but 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: 1.3475
• Prev. Close: 1.3451
• % chg. over the last day: -0.18%

Inflation data will be released today in Canada. Analysts are forecasting a decline in consumer prices from 6.3% to 6.1% year-over-year. But special attention should be paid to core inflation, which excludes food and energy prices. A rise in core inflation will increase the likelihood that the Bank of Canada will hold another 0.25% rate hike. A decline in core inflation will likely confirm that the Bank of Canada has ended its tightening cycle. Also, do not forget about the dynamics of oil quotes since the Canadian dollar is a commodity currency.

Trading recommendations

• Support levels: 1.3444,1.3390,1.3347,1.3295,1.3212
• 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 has become positive, buying pressure returns. Buy trades can be considered from the support of 1.3468, but with additional confirmation on the lower time frames. Above the resistance level of 1.3520, 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.