The Analytical Overview of the Main Currency Pairs on 2023.05.17

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0881
• Prev. Close: 1.0862
• % chg. over the last day: -0.08%

The Eurozone consumer price data will be released today. The main focus of investors’ attention should be on the core inflation rate, which the European Central Bank monitors to adjust monetary policy tightening. Core inflation is expected to remain at 5.6% on an annualized basis, increasing the likelihood of further rate hikes by the ECB. Economists are currently forecasting at least two more ECB interest rate hikes of 0.25% at the next two meetings in June and July.

Trading recommendations

• Support levels: 1.0828,1.0711
• Resistance levels: 1.0904,1.0956,1.0995,1.1056,1.1075,1.1094,1.1185

The trend on the EUR/USD currency pair on the hourly time frame is bearish. The price is trading at the level of moving averages, the MACD indicator is in the negative zone, and there is weak sellers’ pressure. Downward movement persists, and buyers’ reaction to support levels is weak. Under such market conditions, buy trades are best considered from the support level of 1.0828 but with confirmation in the form of a change in the structure on the lower time frames. Sell deals can be considered from the 1.0904 resistance level, but only with confirmation, as the level has already been tested.

Alternative scenario:

if the price breaks through the resistance level of 1.1000 and fixes above it, the uptrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.2427
• Prev. Close: 1.2484
• % chg. over the last day: +0.47%

The UK labor market data came out worse than expected. Jobless claims jumped from 26.5k to 46.7k (forecast 31.2k). The unemployment rate increased from 3.8% to 3.9%. This is the first sign of weakness in the labor market. The markets still estimate the probability of a rate hike by the Bank of England (BoE) at the June meeting at about 70%. But the Bank of England’s next moves will depend on the next inflation data.

Trading recommendations

• Support levels: 1.2465,1.2436,1.2386,1.2343,1.2320
• Resistance levels: 1.2546,1.2569,1.2612

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 forming a wide-volatile corridor, and sellers dominate inside the day. The MACD indicator is in the negative zone, with no signs of reversal. The most optimal level to buy is the 1.2465 level or, in case of a deeper decline, the level of 1.2436, but only with a confirmation in the form of a false breakdown and change of the structure on the lower time frames. Sell trades are best sought from the resistance level of 1.2546 but with confirmation in the form of a false breakout and reverse initiative.

Alternative scenario:

if the price breaks down through the 1.2612 resistance level and fixes above it, the uptrend will likely resume.

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 136.10
• Prev. Close: 136.37
• % chg. over the last day: +0.20%

From the fundamental point of view, the situation on the USD/JPY currency pair remains the same. The Bank of Japan keeps the rate in the negative territory at minus 0.1% and still keeps its soft monetary policy, despite the rumors that there is an active working out of phasing out the stimulus policy. The US Fed is holding the rate in the restrictive 5.25% territory, and there is a slight possibility of another increase. As long as the interest rate differential does not start to narrow, there are no factors for the JPY to strengthen against the USD.

Trading recommendations

• Support levels: 135.15,134.67,133.50,133.03,132.70,132.02,131.82,130.62
• Resistance levels: 136.42,137.26,137.91

From the technical point of view, the medium-term trend on the currency pair USD/JPY has changed to bullish. The price has consolidated above the sell area and broke through the priority change level. The MACD indicator is in the positive zone, but there is a divergence, which limits the potential for further growth. Under such market conditions, it is best to look for buy deals from the support level of 135.16 or from 134.67, but with confirmation in the form of impulse reaction of buyers. Sell positions can be considered from the resistance level of 136.41 or 137.25, but also with confirmation on the lower time frames.

Alternative scenario:

if the price fixes below the 134.67 support level, with a high probability the downtrend will resume.

The USD/CAD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.3466
• Prev. Close: 1.3477
• % chg. over the last day: -0.08%

Canadian inflation data was mixed. On an annualized basis, the consumer price index declined from 4.3% to 4.1%. On the other hand, on a monthly basis, consumer prices rose by 0.7%. Core inflation has declined from its peak at the beginning of last year, but the rate of decline is not as fast as the Canadian Central Bank would like to see. And the Bank of Canada’s inflation expectations figures still suggest that the pressure will be well above the 2% inflation target in the coming years. There remains the possibility that the Bank of Canada may revise the policy for another rate hike.

Trading recommendations

• Support levels: 1.3397,1.3334,1.3267
• Resistance levels: 1.3500,1.3551,1.3589,1.3647,1.3667,1.3695

From the point of view of technical analysis, the trend on the USD/CAD currency pair in the medium term is still bearish. Yesterday, the price tested the buying zone of the last upward movement but did not reach the support level. The price is now trading at the level of the moving averages. The MACD indicator has become inactive. Under such market conditions, it is best to look for buy trades from the support level of 1.3397 but with confirmation in the form of buyers’ reaction to the level. Sell deals are best sought from the resistance level of 1.3500 but with confirmation in the form of a sellers’ initiative.

Alternative scenario:

by JustMarkets, 2023.05.17