The Analytical Overview of the Main Currency Pairs on 2023.08.07

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0941
• Prev. Close: 1.1003
• % chg. over the last day: +0.57%

The labor market remains strong and confirms the Fed’s baseline scenario that the US Central Bank will still be able to give the economy a soft landing and avoid a recession. Employment rose by 187k in July, of which 172k were in the private sector, up from June. The unemployment rate fell to 3.5%, and the labor force participation rate rose to 60.4%. The number of open vacancies exceeds the number of unemployed by 1.6 times. Analyzing the Federal Funds futures data, the markets still believe that the Fed Funds rate maximum has already been reached. Now the focus of investors has shifted to the publication of data on consumer inflation in the US on August 10.

Trading recommendations

• Support levels: 1.0973,1.0945,1.0926,1.0866
• Resistance levels: 1.1046,1.1102,1.1198,1.1227.

The trend on the EUR/USD currency pair on the hourly time frame is bearish. On Friday, the price reached the daily support level, which was followed by a buyers’ reaction, with a change of structure within the day. The MACD indicator has become positive, with intraday buying pressure persisting. Under these market conditions, buy trades can be considered from the support level of 1.0973 or 1.0945, but with confirmation in the form of buyers’ reactions. Sell trades can be considered from the resistance level of 1.1046 but with confirmation in the form of a false breakout.

Alternative scenario:

if the price breaks through the resistance level of 1.1046 and fixes above it, the uptrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.2705
• Prev. Close: 1.27471.2741
• % chg. over the last day: +0.28%

Last week the Bank of England raised interest rates by 25 basis points in line with market forecasts and left open the possibility of a further rate hike at the September meeting. According to the latest market estimates, the probability of a 25 bps rate hike on September 21 is 67%, with the final rate expected next March at 5.75%. Also, at the September meeting, the Bank of England will consider the future pace of UK bond sales (QT). Accelerating the pace of UK bond sales could help tighten monetary conditions and give the Bank of England a little leeway if necessary. For the British pound, factors are now for strength against the dollar.

Trading recommendations

• Support levels: 1.2715,1.2676,1.2649
• Resistance levels: 1.2762,1.2804,1.2880,1.2913,1.2942,1.3011,1.3072

From the technical point of view, the trend on the GBP/USD currency pair on the hourly time frame is bearish. But the buyers are gradually intercepting the initiative and moving the price to the priority change level. Two buying zones have already been formed below the price, which will protect the price from falling. The MACD indicator has become positive, and the correction has started. The most optimal level for buying is 1.2715 or 1.2676 but with confirmation on the lower time frames. Sell trades are best considered from the resistance level of 1.2804 but with confirmation in the form of a false breakout and sellers’ initiative.

Alternative scenario:

if the price breaks through the resistance level of 1.2804 and fixes above it, the uptrend will most likely resume.

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 142.52
• Prev. Close: 141.74
• % chg. over the last day: -0.55%

At the end of last week, the Bank of Japan (BoJ) started buying government bonds as the USD/JPY pair rushed to the psychological 145.00 level, and the 10-year bond yield reached 0.655%. As a result, the Japanese yen partially strengthened against the dollar. The comments of the Bank of Japan that only excessive movements can be a reason for currency intervention may lead to new purchases of JPY, so traders should be very careful. This week, Japan will publish data on factory inflation, which is usually a leading indicator of consumer inflation.

Trading recommendations

• Support levels: 140.98,140.71,139.57
• Resistance levels: 143.54,143.32,145.00

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bullish. The price is correcting and trading at the level of moving averages. A trend continuation pattern is formed – a wedge. The MACD indicator is in the negative zone and indicates another possible wave of decline. The most suitable level for buying will be 140.97 or 140.71 but with confirmation in the form of buyers’ initiative on the lower timeframes. Sell trades can be considered from the resistance level of 143.32 but with confirmation in the form of sellers’ initiative.

Alternative scenario:

if the price fixes below the 140.70 support level, with a high probability that the downtrend will resume.

The USD/CAD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.3354
• Prev. Close: 1.3374
• % chg. over the last day: +0.15%

The Canadian economy unexpectedly showed a contraction of 6,400 jobs in July (forecast + 24,600), and the unemployment rate rose to 5.5%, data showed on Friday, reinforcing analysts’ expectations that the Bank of Canada will pause its interest rate hike campaign. Money markets now expect a rate hike in September with a 28% probability, up from 32% before the report. The disappointing employment data triggered a sell-off in the Canadian dollar. At the moment, the only factor left to strengthen the Canadian currency is oil prices. And as long as prices for black gold are rising, the Canadian dollar will be kept from strong shocks.

Trading recommendations

• Support levels: 1.3342,1.3281,1.3224,1.3199,1.3150,1.3131
• Resistance levels: 1.3386,1.3426

From the point of view of technical analysis, the trend on the USD/CAD currency pair is bullish. The price is trading above the moving averages but has reached the daily resistance level. A false breakdown zone was formed on Friday, but it is not confirmed by a change of structure. The MACD indicator is still showing signs of an impending corrective movement. It is better to buy after a pullback to the support level of 1.3342 or, in case of a deeper correction – to 1.3281. Sell trades are best sought from the resistance level of 1.3386, subject to a false breakout, as the level has already been tested.

Alternative scenario:

if the price breaks through and consolidates below the support level of 1.3199, the downtrend will resume with a high probability.