The Analytical Overview of the Main Currency Pairs on 2023.12.05

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0876
• Prev. Close: 1.0835
• % chg. over the last day: -0.37%

The dollar index gained 0.42% on Monday and posted a 1-week-high. The dollar rose amid concerns that markets may be overly optimistic about the chances of a Fed rate cut early next year. In turn, the euro gave up early gains and retreated amid dovish comments from ECB Governing Council spokesman Centeno, who warned that the labor market consequences of too much monetary tightening could be swift when the economy turns around. Swaps tied to ECB meeting dates estimate a 73% probability that the ECB will cut the benchmark rate by 25 bps at its March 7 meeting.

Trading recommendations

• Support levels: 1.0824,1.0756,1.0729,1.0700,1.0664
• Resistance levels: 1.0858,1.0894,1.0961,1.0994,1.1004,1.1063

The trend on the EUR/USD currency pair on the hourly time frame has changed to a downtrend. The price broke through the priority change level and consolidated below. Now, the price has found the support level of 1.0824, below which there is a liquidity void area. Taking into account the formed divergence on the MACD indicator, there is a high probability of correction to the nearest resistance levels. Selling can be considered intraday from the moving average levels around the resistance level of 1.0858, but with confirmation as the price may make a deeper correction around 1.0894.

Alternative scenario:

if the price breaks the resistance level at 1.0994 and consolidates above it, the uptrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.2686
• Prev. Close: 1.2631
• % chg. over the last day: -0.44%

Most of the current week’s GBPUSD price will be determined by risk sentiment and data from the US. BRC retail sales data from the UK and S&P Global Services PMI will be released today, after which the focus will shift to the US session. The UK figures are not expected to change significantly. The most important release today will be the US Services PMI from ISM, as well as the US JOLTS Job Openings. Policymakers remain concerned about the sustainability of the labor market, the service sector, and their roles in fighting inflation. A significant drop in the indicators could lead to expectations of a rate cut rising again and weakness returning to the US dollar.

Trading recommendations

• Support levels: 1.2602,1.2525,1.2478,1.2448,1.2347,1.2309
• Resistance levels: 1.2652,1.2688,1.2723,1.2745

From the point of view of technical analysis, the trend on the GBP/USD currency pair on the hourly time frame is still bullish. The pound looks more stable than the euro and is resisting the growth of the dollar. At the moment, the price has formed a broadly volatile balance with the boundaries of 1.2602-1.2723. The MACD indicator has turned negative, but the divergence on the higher time frames is not completely filled, so the price may correct even lower. The most interesting zone is the area below 1.2602, where a lot of liquidity has accumulated. Selling can be sought intraday from the resistance level of 1.2652 or, in case of stronger growth — from 1.2688, but with confirmation in the form of sellers’ initiative. Buying is best sought from the support level of 1.2602, but also with confirmation in the form of buyers’ initiative and a quick return above the level, as the price may accelerate on the bearish impulse and fall straight to 1.2525.

Alternative scenario:

if the price breaks the support level of 1.2525 and consolidates below, the downtrend will likely resume.

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 146.69
• Prev. Close: 147.20
• % chg. over the last day: +0.34%

The yen initially rose on Monday as the Bank of Japan cut its bond purchases, reducing the amount of 10-25-year bonds to 150 billion yen from 200 billion yen during the last bond-buying operation. But amid a rising dollar, the yen retreated from a 2-month high against the dollar by the end of the trading day. The latest data showed Tokyo’s core consumer price index fell to 2.3% from 2.7% y/y, confirming the Japanese Central Bank’s view that cost pressures in the world’s third-largest economy will gradually ease. This reduced the likelihood of an earlier move by the BoJ to normalize monetary policy. BoJ Governor Kazuo Ueda has recently emphasized the need to maintain an ultra-loose policy until inflation driven by recent cost pressures is replaced by demand-driven price increases backed by strong wage increases.

Trading recommendations

• Support levels: 146.74,145.89
• Resistance levels: 147.34,147.79,148.29,149.32,149.75,150.14

From the technical point of view, the medium-term trend on the currency pair USD/JPY is still bearish. The price has found the resistance level at 147.35, where sellers have started to be active. Weak US data today may lead to a further decline in quotes, but taking into account the support level of 146.74, below which the zone of “locked” buyers has formed, the price may simply flutter between these levels.

Alternative scenario:

if the price consolidates above the resistance level of 148.51, the uptrend will likely resume.

The XAU/USD currency pair (gold)

Technical indicators of the currency pair:

• Prev. Open: 2070
• Prev. Close: 2026
• % chg. over the last day: -2.17%

Precious metals prices gave up early gains on Monday and fell sharply on concerns that markets may be overly optimistic about the Federal Reserve’s chances of cutting interest rates in the second quarter of 2024. Metals prices initially surged on Monday, with gold rising to an all-time high. The rise came on speculation of imminent interest rate cuts by global central banks. However, a rise in the dollar index to a 1-week high and higher bond yields on Monday caused pressure to liquidate long positions, and metals prices fell sharply. Silver prices also came under pressure after US factory orders fell more than expected in October, indicating weak demand for industrial metals.

Trading recommendations

• Support levels: 2020,2005,1998,1979,1955
• Resistance levels: 2053,2079,2145

From the point of view of technical analysis, the trend on the XAU/USD is bullish, but it is close to change. One day was enough for gold to surge more than 3% and then show the biggest one-day drop of more than 2%. Volatility has skyrocketed. Grabbing liquidity above all-time highs meant that this liquidity had to be reduced to near-term support levels. But in the end, the price was reduced right to the level of the priority shift, which came as a surprise. Now, the price is showing a weak bounce from the level, and there is a high probability of further price decline and priority change. There are no conditions for buying in this time frame. Selling can be looked for from moving averages or resistance level 2053 but with confirmation in the form of buyers’ initiative. The first target is 2020, which is the priority change level.

Alternative scenario:

if the price breaks below the support level of 2020, the downtrend will likely resume.