The Analytical Overview of the Main Currency Pairs on 2023.09.05

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0775
• Prev. Close: 1.0792
• % chg. over the last day: +0.16%

Speaking in London yesterday, ECB President Christine Lagarde avoided saying whether the European Central Bank will raise or hold interest rates next week. That said, Lagarde indicated the following: “We have raised rates by a total of 425 basis points in 12 months – a record pace in record time. And we will get inflation back to our medium-term target of 2% in a timely manner.” The latest Eurozone inflation data released last week showed the ECB’s tracked core rate slowed to 5.3% in August from 5.5% the previous month. The probability that the ECB will raise rates by 0.25% next week is around 25%.

Trading recommendations

• Support levels: 1.0781,1.0767,1.0767
• Resistance levels: 1.0827,1.0842,1.0893,1.0943,1.1004

The trend on the EUR/USD currency pair on the hourly time frame is a downtrend. The price has consolidated below the priority change level and is now trading below the moving averages. The MACD indicator is in the negative zone, but the selling pressure is easing. Since the price made a false breakdown of the 1.0781support level, from this level, traders can consider buy trades, but with confirmation in the form of a change of structure on the lower time frames. Sell trades can be considered from the resistance level of 1.0827 or 1.0842 but with confirmation in the form of a reverse initiative. The reverse initiative means the sellers’ reaction in the form of an engulfing candlestick or when a pin bar is formed.

Alternative scenario:

if the price breaks through the resistance level of 1.0893 and fixes above it, the uptrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.2588
• Prev. Close: 1.27471.2613
• % chg. over the last day: +0.20%

The Commitment of Traders report shows that the net positioning on GBP/USD remains bullish. This is in reference to hedge funds, which are required to disclose their currency exposure to the CFTC. An additional factor supporting sterling is interest rate expectations. Markets are still assuming the possibility of two more 25 bps rate hikes this year, with an 86% chance of a 25 bps hike later this month and another hike before June next year. This prevents GBP/USD from falling, especially at a time when further Fed rate hikes look unlikely, negating support for the dollar.

Trading recommendations

• Support levels: 1.2611,1.2562,1.2549,1.2520,1.2491
• Resistance levels: 1.2659,1.2712,1.2733,1.2746,1.2764

According to the technical analysis, the trend on the GBP/USD currency pair on the hourly time frame is bullish. The British pound fell less than the euro, which indicates resistance to the growth of the dollar. Now, the price is trading at the level of moving averages and forms a narrow flat. The MACD indicator has become inactive. Buy trades can be considered from the support level of 1.2611 but with additional confirmation on the lower time frames. However, there is still a probability of testing the liquidity below 1.2562. Sell trades are best considered from the resistance level of 1.2659 but with confirmation in the form of sellers’ initiative.

Alternative scenario:

if the price breaks through the support level of 1.2562 and fixes below it, the downtrend will most likely resume.

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 146.15
• Prev. Close: 146.46
• % chg. over the last day: +0.21%

The Bank of Japan (BOJ) will only be able to phase out loose monetary policy once the 2% inflation target is sustainably achieved, former BOJ board official Goushi Kataoka said on Monday. Kataoka expects the wage negotiations in spring 2024 to be key to the BOJ’s inflation mission. Kataoka also expects the BOJ to first remove the 10-year Japanese government bond (JGB) yield peg, then exit the negative interest rate policy and finally abandon the YCC policy once the exit from soft policy begins.

Trading recommendations

• Support levels: 146.23,145.69,145.39,145.00,143.54,143.26,142.64,140.98
• Resistance levels: 146.79,147.09

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bullish. The price returned to growth and reached the selling zone. Now, the price is trading above the moving averages, but resistance levels are ahead. The MACD indicator has become positive, and the buying pressure remains, but there are the first hints of divergence. Buy trades should be sought on intraday time frames after a pullback to the support level of 146.23. Sell trades can be considered from the resistance level of 146.79 or 147.09 but with confirmation in the form of a reverse initiative.

Alternative scenario:

if the price fixes below the 145.00 support level, with a high probability that the downtrend will resume.

The XAU/USD currency pair (gold)

Technical indicators of the currency pair:

• Prev. Open: 1940.49
• Prev. Close: 1938.29
• % chg. over the last day: -0.11%

Gold was little changed yesterday due to the bank holiday in the United States. But the outlook for precious metals remains optimistic. Gold and silver will look to rally on expectations that the US Federal Reserve is at the end of its tightening cycle. This means that as soon as the US Fed stops raising interest rates, government bond yields will start to fall, which will lead to an increase in gold and silver prices, which have an inverse correlation to government bond yields.

Trading recommendations

• Support levels: 1934.92,1924.31,1914.35,1903.87,1893.80
• Resistance levels: 1947.78,1961.06

From the point of view of technical analysis, the trend on the XAU/USD currency pair is bullish. The price is forming a flat accumulation and is trading at moving average levels. The MACD indicator has turned negative, but the buying pressure is weak. There is a high probability of a liquidity test below the support level of 1934.92. In case of a downside breakdown, the price will rush to the 1921.31 support level. It is better to look for sell trades from the resistance level of 1947.78 but with confirmation in the form of a reversal initiative and a change of structure on intraday time frames.

Alternative scenario:

if the price breaks through and consolidates below the support level of 1914.35, the downtrend is likely to resume.