The Analytical Overview of the Main Currency Pairs on 2023.08.16

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0902
• Prev. Close: 1.0901
• % chg. over the last day: -0.01%

Today in the US, the July Federal Open Market Committee (FOMC) meeting protocols will be released. The July protocols will help investors gauge the Fed’s appetite for further rate hikes. Analysts expect the FOMC meeting minutes to show a hawkish sentiment as policymakers unanimously continue to argue that there is still much work ahead and that the fight against inflation is not over. In this case, the market sentiment will favor further growth of the dollar index. But suppose the protocols show caution and complete reliance on incoming data. In that case, the likelihood will increase that the Fed will likely not raise rates again as inflation is steadily declining and rates are in restrictive territory. This “cautious” tone of the FOMC protocols will shift the narrative towards buying risk assets such as the euro and pound.

Trading recommendations

• Support levels: 1.0901,1.0883,1.0928,1.0911,1.0866
• Resistance levels: 1.0959,1.0983,1.1004,1.1046,1.1102,1.1198,1.1227

The trend on the EUR/USD currency pair on the hourly timeframe is bearish. The price is trading below the moving averages. The MACD indicator is in the negative zone, but the selling pressure is easing, and the price is trading near the support level. Under such market conditions, buy trades can be considered from the support level of 1.0901 or 1.0883, but with confirmation in the form of structure change on the lower timeframes. Sell trades can be considered from the resistance level of 1.0959 but with confirmation in the form of sellers’ reactions.

Alternative scenario:

if the price breaks through the resistance level of 1.1004 and fixes above it, the uptrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.2685
• Prev. Close: 1.27471.2702
• % chg. over the last day: +0.13%

UK inflation data will be published today. Analysts expect consumer prices to decline from 7.9% to 6.7% y/y and core inflation (excluding food and energy prices) to fall from 6.9% to 6.8% y/y. These data need to be analyzed with GDP and labor market data. GDP data released last week came in better than expected, while labor market data yesterday showed a sharp rise in jobless claims, an increase in the unemployment rate from 4.0% to 4.2%, and wage growth from 7.2% to 8.2% y/y. The labor market is softening, which will likely force the Bank of England to move more conservatively with a 0.25% hike at the September meeting.

Trading recommendations

• Support levels: 1.2646,1.2621
• Resistance levels: 1.2710,1.2738,1.2791,1.2880,1.2913,1.2942,1.3011,1.3072

From the technical point of view, the trend on the GBP/USD currency pair on the hourly time frame is bearish but close to change. The price is trading at the level of moving averages. Yesterday, the price attempted to change the priority but failed to break out of the 1.2738 resistance level. The MACD indicator has become inactive. Buy trades can be considered from the support level of 1.2646 but with additional confirmation on the lower timeframes in the form of a structure change. Sell trades are best considered from the resistance level of 1.2738 or in case of a sharp movement from 1.2791 but with confirmation in the form of sellers’ initiative.

Alternative scenario:

if the price breaks through the resistance level of 1.2738 and fixes above it, the uptrend will most likely be renewed.

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 145.55
• Prev. Close: 145.56
• % chg. over the last day: +0.01%

Japan’s GDP beat forecasts in the second quarter due to increased exports. Japan’s 6.0% annualized growth rate led to a quarterly gain of 1.5%, well above the average estimate of 0.8%. The key GDP data provides some relief to Bank of Japan policymakers seeking to balance economic growth with inflation. This helped the Japanese yen to strengthen slightly against the dollar. However, the medium-term outlook points to the continued growth of USD/JPY quotes due to the divergent monetary policies of the US Federal Reserve and the Bank of Japan.

Trading recommendations

• Support levels: 145.00,143.72,143.26,142.64,140.98,140.71,139.57
• Resistance levels: 145.95

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bullish. The price broke through the psychological mark of 145 and continued the upward movement. The MACD indicator is in the positive zone, but the divergence is observed on several timeframes. Buyers are finding it more and more challenging to move the price higher, the feeling of pulling the spring for a sharp fall. The most suitable level for buying will be 145.00, but with confirmation in the form of buyers’ initiative on the lower timeframes. In the case of currency intervention, the fall may be to the 143.72 support level. Sell trades can be considered from the resistance level of 145.95 but with confirmation in the form of sellers’ initiative and change of trend structure.

Alternative scenario:

if the price fixes below the 143.25 support level, with a high probability that the downtrend will be renewed.

The USD/CAD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.3457
• Prev. Close: 1.3496
• % chg. over the last day: +0.29%

The Canadian Consumer Price Index rose from 2.8% to 3.3% on an annualized basis. Core inflation (excluding food and energy prices) remained at 3.2% y/y. Inflation was stronger than expected in both monthly and annualized terms. But the progress on underlying price pressures gives Bank of Canada policymakers an opportunity to hold off on raising interest rates. Most economists expect the Central Bank of Canada to keep the overnight rate at 5% next month.

Trading recommendations

• Support levels: 1.3437,1.3410,1.3342,1.3319,1.3281,1.3263,1.3224,1.3199
• Resistance levels: 1.3500,1.3557

From the point of view of technical analysis, the trend on the USD/CAD currency pair is bullish. The price is trading in a corridor with slight upward pressure. The MACD indicator is in the positive zone, and the pressure of buyers remains. It is better to buy after a pullback to the support level of 1.3437 or, in case of a deeper correction – from 1.3411. Sell trades are better to look for from the resistance level of 1.3500, but after a false breakout, as the level has already been tested.

Alternative scenario:

if the price breaks through and consolidates below the support level of 1.3371, the downtrend will be renewed with a high probability.