The Analytical Overview of the Main Currency Pairs on 2023.08.28

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0808
• Prev. Close: 1.0793
• % chg. over the last day: -0.13%

On Friday, ECB Governor Christine Lagarde, in her speech at the Jackson Hole Symposium, did not say anything new. Mrs. Lagarde reiterated that the ECB is now data-dependent and makes decisions at each meeting depending on the current economic situation. This week will see the release of a slew of economic data from countries across Europe. GfK’s German consumer climate data on Tuesday and German inflation data on Wednesday will be of interest. Lower inflation and lower consumer sentiment may negatively affect the European currency, as the ECB may take a pause in September.

Trading recommendations

• Support levels: 1.0767,1.0732
• Resistance levels: 1.0813,1.0841,1.0876,1.0892,1.0951,1.0983,1.1004

The trend on the EUR/USD currency pair on the hourly time frame is bearish. The price has found the support level at 1.0767. The MACD indicator has become inactive, and the price is trading at the level of moving averages. Sell trades can be considered from the resistance level of 1.0813 or from 1.0841, but with confirmation in the form of sellers’ reaction. Buy trades can be considered from the support level of 1.0767 but with confirmation in the form of a false breakdown and a change of structure on the lower time frames.

Alternative scenario:

if the price breaks through the resistance level of 1.0876 and fixes above it, the uptrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.2594
• Prev. Close: 1.27471.2576
• % chg. over the last day: -0.15%

Macro data for the UK is expected to be weak this week. The UK housing data will be of interest, but it is unlikely to have a significant impact on sterling. Friday will see the release of PMI data for the manufacturing sector, which will be of interest for valuation purposes. The latest batch of UK economic data has made it less likely that the Bank of England will be forced to go for two interest rate hikes. Today is a bank holiday in the UK, so volatility on currency pairs with the British pound will be low.

Trading recommendations

• Support levels: 1.2549,1.2520,1.2491
• Resistance levels: 1.2615,1.2653,1.2732,1.2764,1.2796,1.2913,1.2942,1.3011

From the technical point of view, the trend on the GBP/USD currency pair on the hourly time frame is bullish. Now, the price has found support at 1.2549 and is trading at the level of moving averages. The MACD indicator has become inactive. Sell trades to continue the downtrend are best considered from the resistance level of 1.2765 or 1.2653 but with confirmation in the form of sellers’ initiative.

Alternative scenario:

Buying can be considered from the support level of 1.2549 but with additional confirmation in the form of a false breakdown of the level and a change of structure on the lower time frames.

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 145.80
• Prev. Close: 146.43
• % chg. over the last day: +0.43%

The yen fell to a 9-month low against the dollar on Friday. Central Bank divergence was a major bearish factor for the yen as Federal Reserve and ECB policymakers on Friday talked about maintaining restrictive monetary policy to control inflation while the Bank of Japan maintains QE and record low rates. Higher Treasury bond yields on Friday also pressured the yen. The consumer price index in Tokyo fell to 2.9% from 3.2% y/y in July, which once again confirms the theory of the Bank of Japan that inflation growth is not sustainable, so it is premature to talk about normalization of monetary policy.

Trading recommendations

• Support levels: 146.18,145.24,144.54,143.54,143.26,142.64,140.98
• Resistance levels: 146.57,146.91

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bullish. The price has found the resistance level at 146.57, but since this level has already been tested three times, there is a high probability of testing the liquidity above. The MACD indicator is in the positive zone, and there are signs of divergence, but the buyers’ pressure intraday remains. Buy trades should be sought after a pullback to the support level of 146.18, as the price has deviated strongly. Sell trades can be considered from the resistance level at 146.57, but with confirmation in the form of a false breakout, as the level has also already been tested.

Alternative scenario:

if the price fixes below the 144.54 support level, there is a high probability that the downtrend will resume.

The XAU/USD currency pair (gold)

Technical indicators of the currency pair:

• Prev. Open: 1916.71
• Prev. Close: 1914.16
• % chg. over the last day: -0.13%

Fed Chairman Jerome Powell said the following at a symposium in Jackson Hole: “Although inflation has moved down from its peak, it remains too high, and we are prepared to raise rates further if appropriate and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our 2% objective.” He added that the Fed “will proceed carefully on whether to hike again as there may still be significant further drag from past rate hikes.” Amid such hawkish notes, US Treasury bond yields rose on Friday, driving precious metals prices lower as they have an inverse correlation to government bond yields.

Trading recommendations

• Support levels: 1911.28,1903.73,1893.80
• Resistance levels: 1918.75,1923.39,1933.24,1938.46

From the point of view of technical analysis, the trend on the XAU/USD currency pair is bearish. On Friday, the price corrected to the support level of 1903.73, but by the end of the day, it partially recovered its position. Now, the price is trading at the level of moving averages, forming sideways intraday. The indicator has become inactive. It is better to buy from the support level of 1911.28 but with confirmation in the form of buyers’ initiative on the lower timeframes. Sell trades are best sought from the resistance level of 1918.75 but with confirmation in the form of a reverse initiative.

Alternative scenario:

if the price breaks through and consolidates below the support level of 1893.81, the downtrend is likely to resume.