The Analytical Overview of the Main Currency Pairs on 2023.05.26

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0748
• Prev. Close: 1.0724
• % chg. over the last day: -0.22%

The German economy entered a technical recession in the first quarter of this year. Data from the German statistical office on Thursday showed a downward revision of GDP (gross domestic product) from 0 to 0.3%. Germany recorded a 0.5% contraction in the last quarter of 2022. Two consecutive quarters of negative growth define a technical recession. Despite this, ECB policymakers are still inclined to keep raising interest rates until September.

Trading recommendations

• Support levels: 1.0711
• Resistance levels: 1.0799,1.0836,1.0875,1.0904,1.0956,1.0995,1.1056,1.1075

The trend on the EUR/USD currency pair on the hourly time frame is bearish. The price reached the daily support level. The MACD indicator is in the negative zone, but the momentum indicates increasing bullish pressure. Under such market conditions, buy trades can be considered from the support level of 1.0711, but only with confirmation, as the level has already been tested. Sell deals could be considered from the resistance level of 1.0799 but with confirmation in the form of a sellers’ reaction.

Alternative scenario:

if the price breaks through the resistance level of 1.0835 and fixes above it, the uptrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.2362
• Prev. Close: 1.2321
• % chg. over the last day: -0.33%

Monetary Policy Committee (MPC) spokesman Jonathan Haskel said yesterday that the Bank of England needs to confront the risk that high inflation will prove persistent and may need to raise interest rates further. The Bank of England has raised rates 12 times since December 2021, bringing interest rates to 4.5% earlier this month. Markets now expect rates to reach 5.5% by November. Haskel added that he still believes the British labor market is resilient despite some signs of weakening and that the economy’s ability to grow without creating excess inflation seems to have weakened.

Trading recommendations

• Support levels: 1.2322
• Resistance levels: 1.2386,1.2415,1.2480,1.2546,1.2569,1.2612

From the technical point of view, the trend on the GBP/USD currency pair on the hourly time frame is bearish. The price has reached the daily support level. The MACD indicator shows a divergence in several time frames. The best level to buy is the level of 1.2322 but with confirmation in the form of a change in the structure on the lower time frames. It is best to look for sell deals from the resistance level of 1.2386 but with a confirmation in the form of a false breakout.

Alternative scenario:

if the price breaks down through the 1.2480 resistance level and fixes above it, the uptrend will likely resume.

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 139.37
• Prev. Close: 140.03
• % chg. over the last day: +0.47%

Bank of Japan Governor Kazuo Ueda said yesterday that changing the Central Bank’s policy target for 5-year bond yields from the current 10-year would be one option to replace yield curve control (YCC). Since declining commodity prices are likely to slow inflation in the coming months, the Bank of Japan should avoid a premature tightening of monetary policy to ensure that Japan sustainably meets its 2% target, Ueda added. The latest data showed that Tokyo’s core consumer price index (a leading indicator of overall inflation) fell from  3.5% to 3.2% year-over-year.

Trading recommendations

• Support levels: 138.86,138.00,137.54,136.52,135.66,135.15,134.67
• Resistance levels: 140.53

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bullish. The price is moving to the daily resistance level of 140.53. The MACD indicator is in the positive zone, but it has already shown signs of divergence in several time frames. The support level of 138.86 can be used to join the bullish trend, but the targets should not be far as the upside potential is limited. But it is best to look for buying from the support level of 136.54. Sell trades can be considered from the resistance level of 140.53 but with confirmation in the form of a false breakout and a change in the structure on the lower time frames.

Alternative scenario:

if the price fixes below the 137.55 support level, with a high probability the downtrend will resume.

The USD/CAD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.3588
• Prev. Close: 1.3642
• % chg. over the last day: +0.40%

Oil prices fell more than 3% yesterday on rumors that OPEC+ countries will keep production unchanged at their June 4 meeting. A day ago, the Saudi energy minister hinted at the possibility of another round of production cuts, but this information has not been confirmed. The Canadian dollar is a commodity currency and is highly correlated with the dollar index and oil prices. And while oil prices are falling and the dollar index is rising because of the impasse in the US debt ceiling negotiations, the Canadian dollar is losing ground against the dollar. But the medium-term outlook for oil remains bullish due to increased demand over the summer, so the outlook for the Canadian dollar to strengthen this summer remains.

Trading recommendations

• Support levels: 1.3611,1.3523,1.3484,1.3468,1.3436,1.3397,1.3267
• Resistance levels: 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 bullish. The price reached the daily resistance level of 1.3647, but a test of 1.3667 is also possible. The MACD indicator is in the positive zone, but there is a divergence. Under such market conditions, it is best to look for trend trades from the support level of 1.3611 or from the moving lines, but with confirmation in the form of buyers’ initiative on the lower time frames. Sell deals are best sought from the resistance level of 1.3647 or 1.3667, but only with confirmation in the form of a false breakout.

Alternative scenario:

by JustMarkets, 2023.05.26