The Analytical Overview of the Main Currency Pairs on 2023.04.05

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0899
• Prev. Close: 1.0955
• % chg. over the last day: +0.51%

The US dollar fell to a two-month low on Tuesday as further weak economic data bolstered investors’ bets that the Federal Reserve is about to end its tightening cycle, even as other central banks continue to raise interest rates. The European currency hit a 2-month high, and with the ECB poised to raise rates at its next meeting, the euro has all the prerequisites for further strength.

Trading recommendations

• Support levels: 1.0908,1.0924,1.0839,1.0770,1.0680,1.0519,1.0482
• Resistance levels: 1.0988,1.1032

The trend on the EUR/USD currency pair on the hourly time frame is bullish. The price traded above the moving averages and broke an important resistance level yesterday. The road is now open to the level of 1.0988 or even higher. The MACD indicator is in the positive zone, but the divergence is starting to form in the higher time frames. It does not mean that the price will change momentum right now, but it is a sign that the upside momentum is becoming weaker. Buy trades are best viewed from the support at 1.0924 or 1.0908, but only with confirmation. Sell deals can be considered from the resistance level of 1.0988, but only on the condition of a reverse reaction.

Alternative scenario:

if the price breaks down through the support level of 1.0770 and fixes below it, the downtrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.2403
• Prev. Close: 1.2499
• % chg. over the last day: +0.77%

Bank of England Chief Economist Huw Pill said that officials might have to raise interest rates even if inflation declines to prevent price rises caused by households and companies trying to recoup lost income. Inflation is expected to fall sharply from its current level of 10.4% in the coming months due to lower energy prices and base effects. The Bank of England has raised rates for 11 consecutive meetings from 0.1% to 4.25%, the fastest tightening cycle since the late 1980s, and market prices suggest that it is close to pausing but is expected to rise another quarter point. As the dollar index fell, the pound rose to its highest level since June 2022.

Trading recommendations

• Support levels: 1.2422,1.2359,1.2320,1.2267,1.2178,1.2112,1.2009,1.1963
• Resistance levels: 1.2519

From the technical point of view, the trend on the GBP/USD currency pair on the hourly time frame is bullish. The MACD indicator is in the positive zone, but it is overbought. The price has deviated strongly from the average values. Under such market conditions, it is best to consider buying after a pullback to the nearest support level of 1.2422 but with confirmation in the form of a reverse reaction. Sell deals are best to look for on intraday time frames from the resistance level of 1.2519, but with a confirmation in the form of a false breakout or a change in the structure on the lower time frames.

Alternative scenario:

if the price breaks down through the 1.2267 support level and fixes below it, the downtrend will likely resume.

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 132.38
• Prev. Close: 131.71
• % chg. over the last day: -0.51%

The appreciation of the Japanese yen in the last two days is a consequence of the dollar index reduction. From the fundamental analysis point of view, there are no fundamental factors for the JPY to strengthen. The Bank of Japan keeps the interest rate at 0.1% and keeps control of the yield curve of 10-year Japanese government bonds (YCC). At the same time, the US Fed rate is at 5%, and there is a 50% chance that the US Fed will increase the cost of borrowing by another 0.25% at the May meeting. As long as the interest rate differential between the US Fed and the Bank of Japan begins to narrow or until the Bank of Japan relinquishes control of the YCC yield curve, the Japanese yen has no basis for strength.

Trading recommendations

• Support levels: 131.29,130.29,127.80
• Resistance levels: 130.91,132.35,133.83,133.16,135.11,136.07,137.91

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bullish, but the price is correcting. At the moment, the price is trading below the moving averages, and the MACD indicator shows the sellers’ pressure, but signs of divergence are already on the horizon. Under such market conditions, the end of the correction should be expected at the support levels of 131.29 or 130.01. Sell deals can be sought from the resistance level of 131.91 or 132.35, but only with an additional confirmation and short targets.

Alternative scenario:

if the price fixes below the 130.91 support level, the downtrend will be resumed with a high probability.

The USD/CAD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.3423
• Prev. Close: 1.3443
• % chg. over the last day: +0.15%

The BoC economic survey showed that business sentiment had not changed much. Businesses still expect their sales to rise but at a slower pace. For many firms, this slowdown will follow a period of exceptional strength last year. Firms also attribute their expectations of weaker sales growth to higher interest rates, high inflation, and recession fears. Firms continue to view the labor market as tight, although labor shortages and wage growth pressures have eased. Labor demand has declined over the past few quarters but continues to be resilient. Firms’ inflation expectations have declined, but most firms still believe inflation will remain well above 2% through at least 2025.

Trading recommendations

• Support levels: 1.3400
• Resistance levels: 1.3495,1.3535,1.3564,1.3616,1.3644,1.3694,1.3722,1.3786

From the point of view of technical analysis, the trend on the USD/CAD currency pair is bearish. After a significant decline, the price begins to form a flat. The MACD indicator has become inactive, and within the day, there is a change in the structure. Probably, traders should expect an upward correction wave in the coming days. Under such market conditions, it is best to look for buy deals from the support level of 1.3400 but with confirmation on the lower time frames. Sell positions can be sought from the resistance level of 1.3495, 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 1.3564, the uptrend will likely resume.