The Analytical Overview of the Main Currency Pairs on 2023.10.12

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0602
• Prev. Close: 1.0618
• % chg. over the last day: +0.15%

The minutes of the FOMC meeting on September 19-20 were mixed. On the one hand, the minutes noted that it is necessary to maintain a restrictive policy, with a possibly one more rate hike before the end of the year. On the other hand, the outlook for the US economy remains uncertain, so the US Fed will proceed cautiously when deciding whether to raise the benchmark interest rate further. Such caution is usually seen as an indication that the Fed is not inclined to raise rates in the near future. Following the FOMC minutes, the probability of new hikes has fallen sharply. There is an 8% probability that the FOMC will raise rates at its next meeting on November 1 and only a 31% probability of a 25 bps rate hike at the December 13 meeting.

Trading recommendations

• Support levels: 1.0543,1.0476,1.0412,1.0223
• Resistance levels: 1.0623,1.0673,1.0697,1.0713,1.0736

The trend on the EUR/USD currency pair on the hourly time frame is bullish. The price is trading above the moving averages. The MACD indicator is positive, but there is a divergence. Now, the price has reached the 1.0623 resistance level, and there is a high probability of liquidity testing above the level. Selling can be looked for from the resistance level of 1.0623 on the condition of a false breakout and reverse reaction on the lower time frames. Buying can be looked for from the support level of 1.0543 or 1.0476, but it is also subject to buyers’ reactions.

Alternative scenario:

if the price breaks through the support level of 1.0475 and fixes below it, the downtrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.2271
• Prev. Close: 1.27471.2312
• % chg. over the last day: +0.33%

From the point of view of technical analysis, the trend on the GBP/USD currency pair on the hourly time frame is bullish. The price is trading above the moving averages but reached the resistance level. The MACD indicator is in the positive zone, but there are signs of buyers’ weakness in the form of divergence. Buying can be looked for after a liquidity test below the support level of 1.2267 or, in case of a deeper correction, from the support level of 1.2190, but subject to buyers’ reaction. Selling can be looked for on an impulsive return below 1.2300.

Trading recommendations

• Support levels: 1.2267,1.2190,1.2162,1.2104,1.2083,1.2009
• Resistance levels: 1.2332,1.2384,1.2420,1.2504,1.2547

Alternative scenario: if the price breaks through the support level of 1.2104 and consolidates below it, the downtrend will likely resume.

Alternative scenario:

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 148.69
• Prev. Close: 149.15
• % chg. over the last day: +0.31%

Fundamentally, there are no factors for the JPY to strengthen now. At the beginning of the week, the JPY rose as war broke out in the Middle East, which led to the buying of the USD and JPY as safe haven currencies. But as the information noise subsides, the factors of the weak monetary policy of the Bank of Japan, which still adheres to the policy of negative interest rates, come back to the forefront. As soon as the situation in the Middle East starts to stabilize, the yen will again continue its downward rally against the dollar (growth of USD/JPY quotes).

Trading recommendations

• Support levels: 148.15,147.32,147.02,146.76,145.88,145.39,145.00
• Resistance levels: 149.53,149.65,150.16

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bearish. Now, the price is forming a broadly volatile flat with the boundaries of 148.15-149.54. Buying pressure prevails inside the flat, as yesterday, the price broke through the descending trend line and is trading above the moving averages. At the moment, the price is looking to test liquidity above the resistance level at 149.54. Sell trades can be looked for from the resistance level at 149.65, but they are subject to sellers’ reaction to this level. Buying can be sought on the lower time frames with a target to the nearest resistance levels.

Alternative scenario:

if the price consolidates above the resistance level of 150.16, the uptrend will likely resume.

The XAU/USD currency pair (gold)

Technical indicators of the currency pair:

• Prev. Open: 1860.09
• Prev. Close: 1873.55
• % chg. over the last day: +0.72%

Precious metals prices rose for the fourth consecutive session on Wednesday, with gold reaching a 2-week-high and silver hitting a weekly high. Concerns over escalating conflict in the Middle East boosted demand for precious metals after Hezbollah militants launched rockets into Israel from Lebanon. In addition, a stronger-than-expected US producer price index report for September boosted demand for gold as an inflation hedge. Today, the CPI inflation report will be released in the US. Economists expect the overall inflation rate to fall from 3.7% to 3.6% y/y, while core inflation is expected to fall from 4.3% to 4.1% y/y. These will be favorable numbers for gold, as lower inflation will minimize the likelihood of another rate hike from the US Fed.

Trading recommendations

• Support levels: 1862.41,1852.07,1833.55,1820.89,1815.47,1804.83
• Resistance levels: 1880.07,1885.75,1901.05,1910.40.

From the point of view of technical analysis, the trend on the XAU/USD is bearish but close to change. The price has now reached the level of the shift in priority. The MACD indicator is in the positive zone, but there are signs of overbought and divergence. Under such market conditions, it is better to look for sales from the resistance level of 1880.07 with confirmation in the form of sellers’ reactions. A false breakout of this level may cause a strong sell-off. For buying, it is worth waiting for buyers’ reaction to the support level of 1862.41 or 1852.07 with a stronger decline.

Alternative scenario:

if the price breaks above the resistance level at 1880.00, the uptrend will likely resume.