The Analytical Overview of the Main Currency Pairs on 2023.09.20

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0683
• Prev. Close: 1.0678
• % chg. over the last day: -0.04%

Eurozone’s inflation data came in line with expectations. Overall inflation fell from 5.3% to 5.2% y/y, while core inflation (excluding food and energy prices) fell from 5.5% to 5.3% y/y. Against the backdrop of these data, the euro declined expectedly, as lower inflationary pressures are dovish for ECB policy. The euro may come under even more pressure today if the US Fed maintains its hawkish tone for the next meetings.

Trading recommendations

• Support levels: 1.0670,1.0635
• Resistance levels: 1.0717,1.0730,1.0768,1.0842,1.0881,1.0943,1.1004.

The trend on the EUR/USD currency pair on the hourly time frame is bearish. The price tested the 1.0718 resistance level, followed by the sellers’ reaction. The MACD indicator became inactive, and volatility decreased ahead of the Fed meeting. There is still a probability of testing the resistance level at 1.0730, where traders can look for sell deals in case of a proper reaction. Buy deals can be looked for from the support level of 1.0670 but with confirmation in the form of buyers’ reaction. Also, traders cannot rule out a possible fall of the euro below 1.0635 to test liquidity.

Alternative scenario:

if the price breaks through the resistance level of 1.0768 and fixes above it, the uptrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.2382
• Prev. Close: 1.27471.2391
• % chg. over the last day: +0.72%

Consumer inflation data will be released in the UK today. Overall inflation is expected to rise from 6.8% to 7% in annualized terms. Core inflation is expected at 6.8% from the current 6.9% y/y. The UK still has one of the highest inflation rates among developed economies, and this increases the likelihood that the Bank of England will raise rates once again at tomorrow’s meeting, despite Bailey’s statements about the imminent end of the tightening cycle. OECD economists have also lowered the UK’s economic growth forecast for next year due to pressure on households and businesses from higher interest rates.

Trading recommendations

• Support levels: 1.2370,1.2307
• Resistance levels: 1.2461,1.2503,1.2547,1.2611,1.2659,1.2712,1.2733

According to technical analysis, the GBP/USD currency pair trend on the hourly time frame is bearish. The price is trading at the level of moving averages and is forming sideways. The MACD indicator has become inactive, and volatility has decreased. As a rule, such a formation occurs before an impulse movement. And today’s inflation data will be a great trigger for it. Since the price is in the discount zone, buy trades can be looked for intraday, but only with confirmation in the form of buyers’ reaction. Sell trades are best considered from the 1.2461 resistance level but with confirmation in the form of sellers’ initiative.

Alternative scenario:

if the price breaks through the resistance level of 1.2547 and consolidates above it, the uptrend will likely resume.

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 147.62
• Prev. Close: 147.84
• % chg. over the last day: +0.14%

BNP Paribas forecasts that the Bank of Japan (BoJ) will keep the monetary policy stable at the upcoming meeting, which will be held on September 21-22. However, BoJ Governor Kazuo Ueda is expected to take a somewhat hawkish stance, primarily to manage the yen’s depreciation. The Bank Governor is also expected to comment on progress towards the price stabilization target. The main forecast remains the adoption of changes in the policy of the Bank of Japan by April next year.

Trading recommendations

• Support levels: 147.59,146.92,145.88,145.39,145.00
• Resistance levels: 147.93,148.80

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bullish. The price continues to consolidate at the levels of moving averages. The MACD indicator has become inactive, and volatility has decreased. Buy trades should be sought intraday from the moving average lines, provided that buyers react. Sell trades can be sought from the resistance level of 147.93 but with confirmation in the form of the reaction of sellers and a change of structure on the lower time frames. It is not recommended to trade in the middle of accumulation.

Alternative scenario:

if the price consolidates below the support level of 145.00, the downtrend will likely resume.

The XAU/USD currency pair (gold)

Technical indicators of the currency pair:

• Prev. Open: 1933.25
• Prev. Close: 1931.92
• % chg. over the last day: -0.07%

The US Federal Reserve will hold its monetary policy meeting today. Markets fully expect the FOMC to leave the interest rate unchanged at 5.50%. However, markets expect the FOMC to maintain its hawkish bias and leave open the possibility of another rate hike later this year. Specifically, markets estimate a 29% probability that the FOMC will raise the funds rate by 25 bps at its next meeting on November 1 and a 15% probability that the rate will be raised by 25 bps at the December 13 meeting. After that, markets expect the FOMC to start cutting rates in 2024 in response to an expected slowdown in the US economy. The hawkish attitude of the FOMC will put negative pressure on precious metals.

Trading recommendations

• Support levels: 1928.49,1918.98,1912.92,1901.08
• Resistance levels: 1934.78,1941.96,1947.81,1961.06

From the point of view of technical analysis, the trend on the XAU/USD currency pair is bullish. But now, the price is trading in the selling zone, and there was a liquidity test above the resistance levels. Under such market conditions, there is a high probability of a corrective downward movement. The MACD indicator has become inactive, but the divergence remains. Buy trades are best sought after a pullback to the support levels of 1918.99 or 1913.09. Sell trades are best sought after a false breakout of the 1934.74 resistance level with sellers reacting.

Alternative scenario:

if the price breaks and consolidates below the support level of 1901.08, the uptrend will likely resume.