The Analytical Overview of the Main Currency Pairs on 2023.08.17

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0902
• Prev. Close: 1.0878
• % chg. over the last day: -0.22%

The hawkish bias of the July FOMC minutes led to a sharp rise in government bond yields and a solid rise in the dollar index. The minutes showed that most participants still see significant upside risks to inflation that could lead to further monetary tightening. But economists remain confident that the Fed has already peaked on rates, while the ECB will raise interest rates at least one more time. The dollar index is benefiting from the hawkish sentiment, but fundamentals are shifting toward a lower dollar in the near term.

Trading recommendations

• Support levels: 1.0851,1.0835,1.0795
• Resistance levels: 1.0898,1.0952,1.0983,1.1004,1.1046,1.1102,1.1198,1.1227

The trend on the EUR/USD currency pair on the hourly time frame is bearish. The price is trading below the moving averages. The MACD indicator is in the negative zone, but there are the first signs of divergence. Sell trades can be considered from the resistance level of 1.0898 but with confirmation in the form of sellers’ reactions. Buy trades can be considered from the support level of 1.0835 or 1.0795 but with confirmation in the form of a structure change on the lower timeframes.

Alternative scenario:

if the price breaks through the resistance level of 1.0952 and fixes above it, the uptrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.2698
• Prev. Close: 1.27471.2730
• % chg. over the last day: +0.25%

UK consumer prices in July declined by 0.4% m/m, and annual inflation slowed from 7.9% to 6.8% y/y. Still, the Bank of England has little to cheer about, as inflation remains the highest among major developed economies, and the slowdown is again more modest than expected. Core inflation remained at 6.9% y/y in June, only slightly better than May’s record of 7.1% y/y. The Bank of England’s Monetary Policy Committee expects inflation to fall to 4.9% by the end of this year. Economists predict at least two more interest rate hikes from the Bank of England, so the British pound is now more resistant to dollar growth than other risky currencies.

Trading recommendations

• Support levels: 1.2715,1.2665,1.2646
• Resistance levels: 1.2796,1.2880,1.2913,1.2942,1.3011,1.3072

From the technical point of view, the trend on the GBP/USD currency pair on the hourly time frame has changed to a bullish one. The price broke through the priority change level yesterday. Now the price is trading at the level of moving averages. The MACD indicator has become inactive. Buy trades can be considered from the support level of 1.2715 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 1.2796 but with confirmation in the form of sellers’ initiative.

Alternative scenario:

if the price breaks through the support level of 1.2646 and fixes below it, the downtrend will most likely be renewed.

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 145.55
• Prev. Close: 146.34
• % chg. over the last day: +0.54%

The yen declined for the eighth consecutive session on Wednesday and hit a 10-month low against the dollar. Central Bank policy differentials are weighing on the yen, with the Bank of England, ECB, and Fed in the mid-to-late stages of their rate hike cycles, while the Bank of Japan is maintaining quantitative easing and record low-interest rates. Yen losses accelerated on Wednesday after hawkish FOMC minutes. The Bank of Japan could intervene at any time to support the currency, so traders should be cautious.

Trading recommendations

• Support levels: 145.66,145.00,143.72,143.26,142.64,140.98,140.71,139.57
• Resistance levels: 146.91

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bullish. The price is trading above the psychological mark of 145 and continues the upward movement. The MACD indicator is positive, but the divergence continues to strengthen. The most suitable level for buying will be 145.65, but with confirmation in the form of buyers’ initiative on the lower timeframes. In case of currency intervention, the fall may occur to 145.00. Sell trades can be considered from the resistance level of 146.91 but with confirmation in the form of sellers’ initiative and change of trend structure.

Alternative scenario:

if the price fixes below the 144.41 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: 1.3496
• Prev. Close: 1.3531
• % chg. over the last day: +0.26%

Oil prices were under pressure yesterday due to concerns over China’s economic growth after JPMorgan Chase and Barclays lowered their forecasts for China’s growth in 2023. The Canadian dollar is a commodity currency and depends not only on the Bank of Canada’s monetary policy but also on the dollar index and oil prices. Since the Bank of Canada has likely ended its tightening cycle, the Canadian dollar has only hoped for oil price growth to resist the dollar.

Trading recommendations

• Support levels: 1.3500,1.3444,1.3410,1.3342,1.3319,1.3281,1.3263
• Resistance levels: 1.3550,1.3594

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. The MACD indicator is in the positive zone, and the pressure on buyers remains, but there are the first signs of divergence. It is better to buy after a pullback to the support level of 1.3500 or, in case of a deeper correction to 1.3444. Sell trades are better to look for from the resistance level of 1.3550 but with confirmation in the form of a structure change on the lower timeframes.

Alternative scenario:

if the price breaks through and consolidates below the support level of 1.3444, the downtrend will be renewed with a high probability.