The Analytical Overview of the Main Currency Pairs on 2024.01.12

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0967
• Prev. Close: 1.0971
• % chg. over the last day: +0.04%

The US dollar strengthened yesterday after the US Consumer Price Index for December rose more than expected, easing expectations of a rate cut by the Fed this spring. The US Consumer Price Index for December rose to 3.4% y/y from 3.1% y/y in November, beating expectations of 3.2% y/y. The core CPI for December declined to 3.9% y/y from 4.0% y/y in November, the lowest reading in 2 years, but above expectations of 3.8% y/y. In addition, signs of a strengthening labor market in the US provided further support to the dollar. Weekly initial jobless claims in the US unexpectedly declined to the lowest level in 2.5 months.

Trading recommendations

• Support levels: 1.0943,1.0900,1.0888,1.0827
• Resistance levels: 1.0996,1.1037,1.1080,1.1097,1.1171

The trend on the EUR/USD currency pair on the hourly time frame is a downtrend. Yesterday, the price tested the supply zone, where sellers showed a reaction, but the nearest support level at 1.0943 stopped the decline. Now, the price is testing the resistance level again. Given that the price has already tested the level several times, the probability of an upside breakout is increasing. The price consolidation above 1.0996 will open the way to 1.1037. Buying can also be considered from the support level 1.0943 if the price is correct today on PPI news. Sell deals can be considered from 1.0996 but are subject to sellers’ reaction to the level.

Alternative scenario:

if the price breaks the resistance level of 1.1037 and consolidates above it, the uptrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.2725
• Prev. Close: 1.2749
• % chg. over the last day: +0.19%

A number of economic data will be released in the UK today, the main one being the GDP data. Economists expect a moderate rebound in December (+0.1% y/y) after a drop last month, which was caused by an unusually large decline in manufacturing activity. However, the quarterly figure may be revised downward, which would indicate a pre-crisis state of the economy and put the Bank of England in a difficult position. Thus, if the GDP report turns out to be weak, it will increase the probability of the Bank of England rate cut in May, which will negatively affect the British pound. Conversely, GDP growth will give the Bank of England more time to keep rates at the current level, which is positive for the British currency.

Trading recommendations

• Support levels: 1.2741,1.2672,1.2611,1.2572,1.2548,1.2499
• Resistance levels: 1.2770,1.2827,1.2881,1.2937

From the point of view of technical analysis, the trend on the GBP/USD currency pair on the hourly time frame is bearish but close to the shift. The price is testing the 1.2770 priority change level again after buyers bought back the pound from 1.2712. The probability of a priority change has increased. A break of 1.2770 will open the way to 1.2827. A false break of the 1.2770 level will lead to sharp sell-offs to 1.2741. Therefore, investors’ focus should be on market participants’ reaction to the supply zone at the priority level.

Alternative scenario:

if the price breaks through the resistance level of 1.2770 and consolidates above it, the uptrend will likely resume.

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 145.72
• Prev. Close: 145.25
• % chg. over the last day: -0.32%

The JPY fell to a 1-month low against the USD as the USD strengthened after a stronger-than-expected US December CPI report pushed back expectations of a Fed interest rate cut. In addition, yesterday’s Japanese economic news weighed on the yen after the CI leading indicators index for November fell more than expected to a 3-year low.

Trading recommendations

• Support levels: 144.26,143.41,142.18,141.12,140.78,140.25
• Resistance levels: 145.55,145.97

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bullish. Yesterday, the price tested the resistance level at 145.97 but failed to consolidate above it. There was a false breakout, and the price showed a change in market structure, which increased the probability of corrective movement. Under such market conditions, buying should be sought from the support level of 144.26, but with confirmation. Sell deals can be considered as part of the correction from the resistance level of 145.55.

Alternative scenario:

if the price consolidates below the support at 141.87, the downtrend will likely resume.

The XAU/USD currency pair (gold)

Technical indicators of the currency pair:

• Prev. Open: 2024
• Prev. Close: 2029
• % chg. over the last day: +0.24%

Gold initially fell yesterday after the US consumer price index for December rose more than expected, and the 10-year breakeven inflation rate rose to a 1-month-high, which is hawkish for US Fed policy and could push back the first-rate cut. But by the end of the trading day, precious metals were in demand as a safe haven amid heightened geopolitical risks in the Middle East after Iran seized an oil tanker off the coast of Oman.

Trading recommendations

• Support levels: 2023,2015,2008,1997,1987,1973
• Resistance levels: 2040,2064,2072,2084,2090,2142

From the point of view of technical analysis, the trend on the XAU/USD is downtrend. Yesterday, gold reached the key support level of 2015, where buyers showed a reaction. Now, the price is approaching the supply zone again. A break of the 2040 resistance level could trigger a sharp upward momentum. A false breakdown of the level, on the contrary, will trigger a sell-off in gold to the support level of 2023.

Alternative scenario:

if the price breaks and consolidates above the resistance level of 2064, the uptrend will likely resume.