The Analytical Overview of the Main Currency Pairs on 2023.05.11

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0958
• Prev. Close: 1.0981
• % chg. over the last day: -0.21%

The US Consumer Price Index decreased slightly from 5.6% to 5.5% year-over-year. Core inflation (which excludes food and energy prices) dipped below 5% and is now at 4.9% annualized. The downward inflation momentum continues, increasing the likelihood of a pause from the Fed in June. The CME FedWatch Tool shows a 96% chance of such a scenario. This is a negative signal for the dollar index as the ECB intends to raise rates further.

Trading recommendations

• Support levels: 1.0962,1.0942,1.0895,1.0830,
• Resistance levels: 1.0996,1.1056,1.1075,1.1094,1.1185

The trend on the EUR/USD currency pair on the hourly time frame has changed to bearish. The price is forming a wide-volatile flat. The MACD indicator has returned to the positive zone, but the buyers’ pressure is weak. The resistance level of 1.0996 prevents the price from fixing higher. Under such market conditions, the further price decline is expected to test liquidity below the support level of 1.0942. Buy trades are best considered from the 1.0942 support level but with confirmation in the form of a false breakdown and a change in the structure on the lower time frames. Sell deals can be considered from the resistance level of 1.0996, but only with confirmation in the form of the sellers’ initiative. A price fixation above 1.0996 will open the way to 1.1047.

Alternative scenario:

if the price breaks through the resistance level of 1.1056 and fixes above it, the uptrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.2616
• Prev. Close: 1.2624
• % chg. over the last day: -0.06%

The Bank of England will hold a monetary policy meeting today. Inflation in the UK is much higher than in the US and Europe, so the Bank of England will seek to reduce inflationary pressures. Markets expect the Bank of England to raise the interest rate by 0.25% from 4.25% to 4.5%, the twelfth consecutive rate hike since December 2021. The Bank of England’s final interest rate is expected to be 4.85% by September 2023. The interest rate differential between the Bank of England and the US Fed will narrow over the next three months, which will strengthen the British pound against the dollar in the medium term. It is also worth paying attention to the speech made by the Governor of the Bank of England, Bailey, on the central bank’s plans for the future. If Bailey suddenly speaks about the forthcoming pause in the rate-raising cycle, it will be a negative factor for the British pound.

Trading recommendations

• Support levels: 1.2577,1.2539,1.2508,1.2421,1.2386,1.2343,1.2320
• Resistance levels: 1.2667

From the technical point of view, the trend on the GBP/USD currency pair on the hourly time frame is bullish. A flat continues to form, and only it is more volatile now. Yesterday the price tested the liquidity above the level of 1.2667 but failed to consolidate higher. The MACD indicator is still inactive, but the divergence points to the weakness of the buyers. The best level to buy is the support level of 1.2577, but only with a confirmation in the form of a false breakdown and a change of the structure on the lower time frames. It is best to look for sell trades on intraday time frames from the resistance level of 1.2667 but with a confirmation in the form of a reverse initiative.

Alternative scenario:

if the price breaks down through the 1.2508 support level and fixes below it, the downtrend will likely resume.

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 135.16
• Prev. Close: 134.35
• % chg. over the last day: -0.60%

Against the background of the fact that the US Federal Reserve, with a 96% probability, will not raise rates in June, interest in the Japanese yen has returned to investors. The Bank of Japan’s ultra-soft monetary policy (with few signs of rate changes) means that external events will primarily influence the yen. If other central banks are expected to go from hawkish to dovish, in the case of the Fed, then the Japanese yen can take advantage of the expected decline in the dollar index.

Trading recommendations

• Support levels: 133.79,133.47,133.03,132.70,132.02,131.82,130.62
• Resistance levels: 134.97,136.46,136.85,137.26,137.91

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bearish. At the moment, the price is trading below the moving averages. The MACD indicator has become negative, and sellers prevail within the day. Under such market conditions, it is best to look for buy deals from the support level of 133.79 but with confirmation in the form of a reverse initiative. Sell positions can be considered from the 134.97 resistance level but with confirmation on the lower time frames.

Alternative scenario:

if the price fixes above the 137.26 resistance level, the uptrend will be resumed with a high probability.

The USD/CAD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.3382
• Prev. Close: 1.3370
• % chg. over the last day: -0.09%

The Canadian dollar is a commodity currency, so it is directly dependent on oil prices as well as the US Index. A sharper-than-expected drop in crude oil inventories yesterday pushed oil prices higher, reflecting higher demand for transportation fuel in the United States. Reduced inflationary pressures also helped oil prices rise. On the other hand, rising global interest rates continue to raise recession fears, so oil’s upside potential is limited. In the medium term, the outlook for oil remains bullish. Accordingly, the Canadian dollar will have an advantage over the US dollar this summer.

Trading recommendations

• Support levels: 1.3300,1.3267
• Resistance levels: 1.3406,1.3484,1.3551,1.3589,1.3647,1.3667,1.3695

From the point of view of technical analysis, the trend on the USD/CAD currency pair is bearish. The price is trading at the level of the moving averages, and a flat is forming. The MACD indicator is inactive. Most likely, this pattern will continue until the publication of the US Producer Price Index, which displays the inflation rate between factories. It is better to buy from the support level of 1.3300 but with a confirmation in the form of a false breakdown and change of the structure on the lower time frames. Sell deals are best looked for from the resistance level of 1.3406 but with confirmation in the form of a seller’s initiative.

Alternative scenario:

if the price breaks out and consolidates above the resistance level of 1.3589, the uptrend will likely be renewed.