The Analytical Overview of the Main Currency Pairs on 2023.05.05

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.1057
• Prev. Close: 1.1011
• % chg. over the last day: -0.42

The European Central Bank has raised the interest rate by 0.25%. The ECB has thus slowed the pace of rate hikes, but unlike the Fed, it is not going to stop and intends to continue to tighten monetary policy. The ECB pointed out that the rate hikes will lead to a sharp tightening of monetary conditions, but the strength of the transfer to the real economy remains uncertain. The European currency has reacted with weakness as the ECB’s “aggression” seems to be cooling down, despite the Eurozone’s core inflation of 5.6% and overall inflation of 7%.

Trading recommendations

• Support levels: 1.1005,1.0978,1.0963,1.0942,1.0895,1.0830
• Resistance levels: 1.1055,1.1075,1.1094,1.1185

The trend on the EUR/USD currency pair on the hourly time frame is bullish. The price has corrected to the buy zone and is trading at the level of the moving averages. The MACD indicator has become inactive. There is a high probability that the price will make one more corrective wave down before it continues to rise. Under such market conditions, buy trades are best considered from the support level of 1.0978. Sell deals can be considered from the resistance level of 1.1055 or 1.1075, 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: 1.2553
• Prev. Close: 1.2571
• % chg. over the last day: +0.14%

The UK Services Business Activity rose to 55.9 from 54.9. It has been above a neutral 50.0 for three months running, and the latest reading was the fastest pace of growth since April 2022. The report indicates that the increase in activity came from an increase in new orders. Sustained demand and growing optimism about business prospects also led to strong job growth. And despite high inflation, activity in the sector is rising. This is a positive factor for the British pound.

Trading recommendations

• Support levels: 1.2539,1.2508,1.2421,1.2386,1.2343,1.2320,
• Resistance levels: 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 above the levels of moving averages. The MACD indicator is in the positive zone, but there are signs of divergence. The best level to buy is 1.2539 or, in case of a stronger decline, 1.2508. It is better to look for sell deals on intraday time frames from the resistance level of 1.2643 but with confirmation in the form of a change in the structure on the lower time frames.

Alternative scenario:

if the price breaks down through the 1.2435 support level and fixes below it, the downtrend will likely resume.

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 134.68
• Prev. Close: 134.27
• % chg. over the last day: -0.31%

Japan will have a public holiday for the rest of the week. Therefore the USD/JPY index will be the main driver in the USD/JPY price formation. In the US, concerns about the banking crisis are growing again. A trio of regional banks, including Western Alliance Bancorporation, First Horizon National Corporation, and PacWest, caused new problems. PacWest Bancorp (PACW) fell more than 50% yesterday on reports that the regional bank is exploring strategic options, including a possible sale. This is a negative factor for the dollar index, as such situations increase the likelihood of a recession scenario in the US.

Trading recommendations

• Support levels: 133.71,133.03,132.70,132.02,131.82,130.62
• Resistance levels: 134.53,136.41,136.85,137.26,137.91

From the technical point of view, the medium-term trend on the currency pair USD/JPY has changed to bearish. The price has consolidated below the priority change level. The MACD indicator is in the negative zone, but there are signs of divergence and oversold. Under such market conditions, it is best to look for purchases after the support level of 133.71 or, in the case of a deeper decline, from the level of 133.03, but with confirmation in the form of a buyer’s reaction. Sell trades can be considered from the 134.53 resistance level, but better with confirmation, as the price may correct higher.

Alternative scenario:

if the price fixes above the 134.00 resistance level, the uptrend will be resumed with a high probability.

The USD/CAD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.3611
• Prev. Close: 1.3537
• % chg. over the last day: -0.55%

According to a speech by Bank of Canada Governor Maclem, the BoC predicts that inflation will fall quickly to 3% this summer and reach its 2% target closer to the end of 2024. The recent global financial turmoil has had little impact on Canada, but if more serious stress arises, the central bank has the tools to provide liquidity. The BoC’s biggest risk is a serious global recession, which could very well come if bank turmoil continues to disrupt financial stability.

Trading recommendations

• Support levels: 1.3500,1.3448,1.3448,1.3409,1.3341,1.3267
• Resistance levels: 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 is bullish. The price has corrected to the buy zone, and there is a high probability of priority change. The MACD indicator is in the negative zone, there is seller pressure inside the day, but there are signs of divergence. Buy trades are better to look for from the support level of 1.3500 but with confirmation in the form of reverse initiative. At the moment, there is none. Sell positions are better to look for from the resistance level of 1.3551 or 1.3589 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 1.3500, the downtrend will likely resume.