The Analytical Overview of the Main Currency Pairs on 2023.05.03

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0967
• Prev. Close: 1.0998
• % chg. over the last day: +0.28%

Inflation in the Eurozone has calmed down a bit but remains high. The annualized consumer price index rose from 6.9% to 7.0%. Core inflation (which excludes food and energy prices) fell from 5.7% to 5.6%. The ECB is likely to be ready to raise rates further after the May meeting. Markets are predicting a +25bp rate hike on Thursday as a compromise decision, but there is a possibility that the ECB could do +50bp to convince everyone of its resolve to fight inflation.

Trading recommendations

• Support levels: 1.1005,1.0978,1.0963,1.0895,1.0830,1.0803,1.0770,1.0680
• Resistance levels: 1.1044,1.1075,1.1185

The trend on the EUR/USD currency pair on the hourly time frame is bullish. The price failed to consolidate below the 1.0963 priority change level. A false breakout area was formed below this level. The MACD indicator returned to the positive zone. Under such market conditions, buy trades are better to consider from the support level of 1.0978 or 1.0963, but with confirmation in the form of reverse initiative. Sell deals can be considered from the resistance level of 1.1044, but only with a confirmation in the form of a false breakout.

Alternative scenario:

if the price breaks down through the support level of 1.0963 and fixes below it, the downtrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.2489
• Prev. Close: 1.2466
• % chg. over the last day: -0.18%

The decline in the UK manufacturing sector continued at the beginning of the second quarter. April saw a decline in output and a drop in new orders, with companies reporting that inventory cuts and cost-cutting efforts contributed to the decline in demand. The seasonally adjusted manufacturing managers’ index (PMI) fell to a three-month low of 47.8 in April from 47.9 in March but above the previous immediate estimate of 46.6. All five components of the PMI signaled deteriorating manufacturing conditions. The British pound is starting to lose ground against the US dollar and the euro.

Trading recommendations

• Support levels: 1.2468,1.2421,1.2386,1.2343,1.2320,
• Resistance levels: 1.2496,1.2536,1.2569,1.2643

From the technical point of view, the trend on the GBP/USD currency pair on the hourly time frame is bullish. At the moment, the price is trading at the level of moving averages. The MACD indicator has become inactive, but there is weak buying pressure. The best levels to buy are 1.2468 or, in case of a stronger decline, 1.2421. The breakdown of the 1.2421 support level will change the priority. It is best to look for sell trades on intraday time frames from the resistance level of 1.2596 or 1.2536 but with confirmation in the form of a structure change on the lower time frames.

Alternative scenario:

if the price breaks down through the 1.2421 support level and fixes below it, the downtrend will likely resume.

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 137.47
• Prev. Close: 136.55
• % chg. over the last day: -0.67%

Japan will have a public holiday for the rest of the week. Therefore, the dollar index will be the main driver in the USD/JPY price formation. The US Federal Reserve will hold a monetary policy meeting today. With an 87% probability, the Fed will raise the rate by 0.25%. But the main focus of the investors will be on the FOMC press conference, which will be held 30 minutes after the rate data publication. If Fed Chairman Jerome Powell points out that this was the last rate hike of the year and the Fed presses the “pause” button, it will be a green light for the Japanese yen, as the rate differential will stop widening. If the Fed chief points out that the economy and labor market are still resilient and the Central Bank leaves the door open for further hikes, that will signal further dollar strength.

Trading recommendations

• Support levels: 136.08,135.11,134.52,133.11,132.70,132.02,131.82,130.62
• Resistance levels: 136.85,137.26,137.91

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bullish. The price started to correct. The MACD indicator became negative. Within the day, there is seller’s pressure. Under such market conditions, it is best to look for buy deals after a pullback to the support level of 136.08 or, in the case of a deeper correction, from the level of 135.11, but with confirmation in the form of a buyers’ reaction. Sell positions can be considered from the 136.86 or 137.26 resistance level, but also with confirmation and short targets.

Alternative scenario:

if the price fixes below the 134.52 support level, the downtrend will resume with a high probability.

The USD/CAD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.3533
• Prev. Close: 1.3624
• % chg. over the last day: +0.67%

Despite the decline in the dollar index yesterday, the USD/CAD quotes jumped up. The reason is the oil decline. The Canadian dollar is a commodity currency and is highly dependent on the dynamics of oil prices. Oil fell by more than 5% yesterday because of concerns about the US default. The Biden administration may not meet all payment obligations by the end of May. And if the debt ceiling is not raised by June 1, the US could default. Adding to the fears of default were the latest data on US manufacturing orders and durable goods, which were lower than expected.

Trading recommendations

• Support levels: 1.3569,1.3523,1.3468,1.3448,1.3409,1.3341,1.3267
• Resistance levels: 1.3624,1.3647,1.3667,1.3695

From the point of view of technical analysis, the trend on the USD/CAD currency pair is bullish. Initially, the price was expected to grab liquidity below the support level of 1.3523 before resuming the trend. But the price reversed earlier. The MACD indicator returned to the positive zone. Buy trades are best sought from the support level of 1.3569 but with confirmation in the form of a reverse initiative. Sell positions are best from the resistance level of 1.3624 or 1.3647 but with a confirmation in the form of a false breakout and reverse initiative.

Alternative scenario:

if the price breaks out and consolidates below the support level of 1.3468, the downtrend will likely resume.