The Analytical Overview of the Main Currency Pairs on 2023.03.16

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0731
• Prev. Close: 1.0574
• % chg. over the last day: -1.48%

Germany’s IfW economic institute said Wednesday it does not expect a strong economic recovery in 2023 because consumers’ purchasing power continues to decline as a result of persistently high inflation. The researchers raised their 2023 GDP growth forecast from 0.3% to 0.5%. The German government predicts GDP growth of 0.2%. For 2024, the institute raised its growth forecast from 1.3% to 1.4%. According to the report, consumer prices will reach 5.4% this year and fall to 2.1% in 2024. The ECB will hold monetary policy meetings today. Reuters reported yesterday that the European Central Bank intends to stick with its plans to raise its key rate by 50 basis points.

Trading recommendations

• Support levels: 1.0571,1.0541,1.0519,1.0482
• Resistance levels: 1.0621,1.0649,1.0679,1.0804,1.0906

The trend on the EUR/USD currency pair on the hourly time frame is still bullish but close to change. The price is trading below the moving averages again. The MACD indicator is in the negative zone but with no signs of a reversal. Buy trades are best considered from the support level of 1.0571 but with intraday confirmation. It is best to buy from the Fibonacci discount zone (marked with a green rectangle). Sell deals could be considered from the resistance level of 1.0649 or 1.0679, provided there is a reversal.

Alternative scenario:

if the price breaks down through the support level of 1.0519 and fixes below it, the downtrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.2153
• Prev. Close: 1.2046
• % chg. over the last day: -0.88%

Chancellor of the Exchequer Jeremy Hunt yesterday outlined the new UK budget. The main changes will affect taxation and benefits to encourage businesses to invest, encourage people to get back to work, and get the economy out of stagnation. Companies will get 9 billion pounds ($10.9 billion) a year in tax breaks through a system of incentives for those who make investments. Families will receive £94 billion in support to offset skyrocketing costs of living, with more than £5 billion a year for childcare assistance. Hunt said the economy would shrink by only 0.2% in 2023, compared to the OBR’s previous forecast of a 1.4% contraction. The report also indicates that the UK will avoid a recession and cut inflation in half this year.

Trading recommendations

• Support levels: 1.2004,1.1963,1.1929,1.1843
• Resistance levels: 1.2143,1.2267

From the technical point of view, the trend on the GBP/USD currency pair on the hourly time frame is bearish. The price is correcting to the nearest support level. The MACD indicator has become negative, and there is slight sellers’ pressure inside the day. It is better to look for buy deals after the correction from the support level of 1.2004 or 1.1963, but better from the discount zone (50-70% Fibonacci). It is better to look for sell deals from the resistance level of 1.2143 but with confirmation.

Alternative scenario:

if the price breaks down through the 1.1843 support level and fixes below it, the downtrend will likely resume.

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 134.28
• Prev. Close: 133.30
• % chg. over the last day: -0.73%

The published data on industrial inflation in the US came out yesterday better than expected. Factory inflation decreased by -0.1% last month. The US inflation is declining, while problems in the banking sector are not going away. This situation points to an imminent change in Fed rhetoric and the imminent end of the rate hike cycle. Federal funds futures show a 40% probability that the rate will remain unchanged at the March 22 meeting and a 60% probability that 25 bps will raise the rate to the 5.00% level. That said, the Fed is expected to cut rates to 3.75% by the end of 2023. What does this mean for the Japanese yen? Considering that the US Fed is in the final stage of policy tightening and the Bank of Japan is likely to start policy normalization this year, this situation will contribute to the strengthening of the Japanese yen (decrease of USD/JPY quotes) in the midterm.

Trading recommendations

• Support levels: 132.27,131.43
• Resistance levels: 133.78,135.11,136.08,137.91,138.15,138.88

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bearish. The MACD indicator is in the negative zone, but there are signs of sellers’ weakness in the form of divergence. Under such market conditions, it is best to look for buy trades from the support level of 132.27, but only with a confirmation in the form of a false breakdown because the level has already been tested. Sell deals can be sought from the resistance level of 133.78, but also with additional confirmation in the form of a reverse initiative on the lower timeframes.

Alternative scenario:

if the price fixes above the 136.08 resistance level, the uptrend will be resumed with a high probability.

The USD/CAD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.3683
• Prev. Close: 1.3762
• % chg. over the last day: +0.58%

Crude oil prices declined for the third day in a row. The US WTI crude has fallen below $70 a barrel. While US authorities tried to ease fears of more widespread problems in the banking sector, the financial turmoil of Swiss bank Credit Suisse posed an additional threat to the global economy. At the same time, the IEA (International Energy Agency) reported an increase in oil inventories, pushing oil supply to an 18-month-high. The Canadian dollar, being a commodity currency, is losing ground on the oil decline.

Trading recommendations

• Support levels: 1.3702,1.3664,1.3590,1.3515
• Resistance levels: 1.3786,1.3811,1.3862

From the point of view of technical analysis, the trend on the USD/CAD currency pair is bullish. The price returned to growth, breaking through the downtrend line. The MACD indicator has become positive again. Under such market conditions, buy trades are worth looking for from the support level of 1.3702, but only with confirmation in the form of reactions on the lower timeframes. Sell deals can be searched from the resistance level of 1.3786, but only with short targets and after confirmation.

Alternative scenario:

if the price breaks down and consolidates below the support level of 1.3634, the downtrend will likely resume.