The Analytical Overview of the Main Currency Pairs on 2023.05.12

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0976
• Prev. Close: 1.0915
• % chg. over the last day: -0.56%

The April US factory inflation (PPI) rose by 0.2%, with the core PPI annualized down from 3.4% to 3.2%. The data came out mixed, but overall, the trend of declining inflationary pressures for manufacturers continues. Initial jobless claims in the US increased by 22,000 in the last week to 264,000, an 18-month high and indicating a crack in the labor market. All of this data increases the likelihood of a Fed pause in June.

Trading recommendations

• Support levels: 1.0904,1.0885,1.0830
• Resistance levels: 1.0961,1.0996,1.1056,1.1075,1.1094,1.1185

The trend on the EUR/USD currency pair on the hourly time frame is bearish. The price is trading below the moving averages, and the MACD indicator returned to the negative zone. The downward movement persists, and the buyer’s reaction to the support level 1.0904 is weak. Under such market conditions, further price decline is expected with the aim of testing the support level of 1.0885. Buy trades are best considered from the support level of 1.0885 but with confirmation in the form of a change in the structure on the lower time frames. Sell deals can be considered from the resistance level of 1.0961, but only with confirmation in the form of sellers’ initiative.

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: 1.2616
• Prev. Close: 1.2511
• % chg. over the last day: -0.84%

The Bank of England yesterday, as expected, increased the interest rate by 25 bps to 4.5%. Voting distribution: 7 voted for a hike, and 2 voted for a pause was also in line with expectations, as were forecasts of higher GDP growth and lower unemployment. The inflation forecast for the end of 2023 was 5.12%, up 1.2% from the 3.92% indicated in the February monetary policy report. At the press conference, BoE head Bailey paid more attention to the risks associated with the fact that the inflation forecast is significantly skewed upward. Based on the minutes and updated data, analysts are predicting another 25 basis point increase at the June 22 meeting.

Trading recommendations

• Support levels: 1.2508,1.2421,1.2386,1.2343,1.2320
• Resistance levels: 1.2569,1.2612

From the technical point of view, the trend on the GBP/USD currency pair on the hourly time frame is bullish. The price has been corrected to the priority change level. A price fixation below 1.2508 will break the structure of the medium-term uptrend. The MACD indicator is in the negative zone, in the oversold area, but without any signs of divergence. The best level to buy is the level of 1.2508, but only with confirmation on the lower time frames. It is best to look for sell deals from the resistance level of 1.2569 but with confirmation in the form of 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: 134.27
• Prev. Close: 134.55
• % chg. over the last day: +0.21%

Bank of Japan Governor Kazuo Ueda yesterday pointed out that the recent volatility in financial markets has not had a serious impact on Japan’s banking system, and the results of stress tests showed that none of its banks has faced serious problems. The dollar index rose yesterday, but USD/JPY quotes remained trading in a range. This suggests that investors are showing interest in the Japanese currency amid the fact that the US Federal Reserve is likely to hit the pause button in June, while the Bank of Japan is considering various options to move away from its soft monetary policy.

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 at the level of the moving averages and forming a volatile corridor. The MACD indicator has become inactive. Under such market conditions, it is best to look for buy deals from the support level of 133.79, but with confirmation because yesterday, the price has already tested it, and there is a probability of a test of 133.50. Sell deals 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: 1.3365
• Prev. Close: 1.3488
• % chg. over the last day: +0.32%

The Canadian dollar is a commodity currency, so it is directly dependent on oil prices and also on the US Index. Oil prices fell by 2% yesterday, while the dollar index was up. The political standoff over the US debt ceiling increases the likelihood of a recession in the world’s largest oil consumer. The debt ceiling debate happens every year, and each time the ceiling is raised. This time will probably not be an exception either, but until then, the recession rumors in the US will have a negative effect on oil and, thus, on the Canadian dollar as well.

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 has corrected to the Fibonacci sell zone. The MACD indicator is upward, with no signs of weakness. 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’ reactions to the level. Sell positions are best sought from the resistance level of 1.3484 or from 1.3551 but with confirmation in the form of a sellers’ initiative.

Alternative scenario:

if the price breaks out and consolidates above the resistance level of 1.3551, the uptrend will likely be renewed.