The Analytical Overview of the Main Currency Pairs on 2023.08.21

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0864
• Prev. Close: 1.0868
• % chg. over the last day: +0.04%

Over the past few weeks, the Euro has lost ground against the Dollar and the British Pound. The US economic data points to economic recovery as the labor market remains resilient, business activity data remains stable, and GDP data rises. Against this backdrop, longer-maturity Treasury bond yields are rising, providing support for the US dollar. This week, the main focus of investors will be on the annual conference of the US Central Bank in Jackson Hole.

Trading recommendations

• Support levels: 1.0858,1.0835,1.0795
• Resistance levels: 1.0896,1.0951,1.0983,1.1004,1.1046,1.1102,1.1198,1.1227

The trend on the EUR/USD currency pair on the hourly time frame is bearish. But on Friday, the price reached the support level and is trading at the level of moving averages. The MACD indicator became positive. Considering the divergence, there is a high probability of corrective upward movement. Sell traders can be considered from the resistance level of 1.0896 but with confirmation in the form of sellers’ reactions. Buy trades can be considered from the support level of 1.0858 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 1.0951 and fixes above it, the uptrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.2741
• Prev. Close: 1.27471.2731
• % chg. over the last day: -0.08%

The UK Retail Sales in July decreased by 1.2% compared to the previous month. The dynamic of retail sales figures suggests that consumers are struggling. What does this mean for the Bank of England? With inflation remaining high, the need for another rate hike remains. Given the evidence regarding GDP growth, some on the Monetary Policy Committee will want to keep the pressure on. The expectation of a UK rate hike in the coming months lends support to the British pound and leads to higher UK government bond yields.

Trading recommendations

• Support levels: 1.2714,1.2666,1.2646
• 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 is bullish. The price trades at the level of moving averages and forms a narrow corridor for liquidity accumulation. The MACD indicator has become inactive, but buying pressure is intraday, so further upward movement is expected. Buy trades can be considered from the support level of 1.2714 but with additional confirmation on the lower timeframes. 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 1.2666 and fixes below it, the downtrend will most likely be renewed.

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 145.80
• Prev. Close: 145.39
• % chg. over the last day: -0.28%

Japan will raise the minimum hourly wage to an average of 1004 yen ($6.91), exceeding the level proposed by the government commission. Japanese prefectures are set to raise wages by an average of 43 yen per hour in the current fiscal year. The increase is the largest since 1978 and will take effect in October. Typically, wage increases lead to higher inflation. And that’s what the Bank of Japan is aiming for, to gradually move towards normalizing monetary policy.

Trading recommendations

• Support levels: 145.00,144.41,143.54,143.26,142.64,140.98,140.71,139.57
• Resistance levels: 145.91,146.55,146.91

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bullish. The price is trading at the level of moving averages. The indicator is in the negative zone, but the selling pressure is weak, which indicates the possible completion of the corrective movement. The most suitable level for buying will be the 145.00-145.15 area but with confirmation in the form of buyers’ initiative on the lower timeframes. In the case of currency intervention, the fall may occur to 144.41 or 143.54. Sell trades can be considered from the resistance level of 145.91 but with confirmation in the form of sellers’ initiative.

Alternative scenario:

if the price fixes below the 144.41 support level, with a high probability that the downtrend will be renewed.

The XAU/USD currency pair (gold)

Technical indicators of the currency pair:

• Prev. Open: 1889.02
• Prev. Close: 1889.26
• % chg. over the last day: +0.01%

Gold has an inverse correlation to the US government bond yields. As mentioned earlier, the US economic data shows that the economy is recovering, which is positive for bond yields. Because of this, gold has been under pressure over the past two weeks. But with growing concerns about economic growth in China, gold’s appeal as a safe haven may increase this week. Real yields also started to decline on Friday amid expectations that Fed Chairman Jerome Powell may change the hawkish bias to a more dovish one at the annual symposium in Jackson Hole this week.

Trading recommendations

• Support levels: 1888.59,1884.66,1854.17,1843.69,1835.37
• Resistance levels: 1895.38,1903.53,1911.51,1923.24

From the point of view of technical analysis, the trend on the XAU/USD currency pair is bearish. The price is trading in a descending channel but has reached a strong support level. The MACD indicator is in the negative zone, but there are signs of divergence. Buying pressure prevails intraday. Buy traders are best sought after a pullback to the support level of 1888.59. Sell trades are best sought from the resistance level of 1895.38 but with confirmation in the form of a false breakout, as the level has already been tested. In case of a breakout of 1895.38, traders should expect the price to test the liquidity above the 1903.53 resistance level.

Alternative scenario:

if the price breaks through and consolidates above the resistance level of 1911.51, the uptrend will likely start.