The Analytical Overview of the Main Currency Pairs on 2023.12.18

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0992
• Prev. Close: 1.0893
• % chg. over the last day: -0.91%

Hawkish comments from the Fed officials on Friday provided support for the dollar. New York Fed President Williams and Atlanta Fed President Bostic indicated that it is premature to talk about a rate cut in March 2024, and if inflation declines as expected, the most optimal time to cut rates will form in Q3 2024. In addition, weaker-than-expected Eurozone economic news put pressure on EUR/USD quotes after Eurozone manufacturing and service sector activity contracted more than expected. Overall, the US Fed is expected to cut rates by 75-125 bps next year, while the ECB is expected to cut rates by 75 bps. As a result, throughout the year, the euro and the US dollar will be balanced with a slight advantage on the side of the euro.

Trading recommendations

• Support levels: 1.0891,1.0827,1.0791,1.0766,1.0728
• Resistance levels: 1.0950,11.1008,1.1046,1.1100

The trend on the EUR/USD currency pair on the hourly time frame is bullish. On Friday, the price reacted to the resistance level of 1.1008, after which EUR/USD quotes corrected to the nearest support levels. Here, traders can look for buy trades, but with short stops, as the price can make another wave of decline down to the support level of 1.0827. Sell deals can be sought from the resistance level of 1.0950 or 1.0980, but only with confirmation, and it is best to use these levels to partially close longs.

Alternative scenario:

if the price breaks the support level at 1.0766 and consolidates above it, the downtrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.2760
• Prev. Close: 1.2670
• % chg. over the last day: -0.71%

On Thursday, the Monetary Policy Committee (MPC) failed to convincingly state that UK wage growth and service sector inflation are definitely on a downward path. Inflation data for October, which was released last month, showed a significant step in the right direction. However, the Bank of England (BoE) has focused its attention on services inflation, an area of underlying price pressure that has yet to show convincing signs of easing. This week, inflation data for November will be released on Wednesday, providing a fuller picture of consumer and manufacturing price developments.

Trading recommendations

• Support levels: 1.2642,1.2652,1.2572,1.2548,1.2499
• Resistance levels: 1.2702,1.2745,1.2796

From the point of view of technical analysis, the trend on the GBP/USD currency pair on the hourly time frame is bullish. At the moment, there is a correction within the bullish trend. But unlike the euro, the British pound has not reached the support level. Therefore, there is still a probability that the price will fall to 1.2642. It is this level that should be considered to join the trend, but it is imperative to see the reaction of buyers, as any support/resistance level is sooner or later broken. Sell deals can be looked for from the resistance level of 1.2702, but they are subject to sellers’ reactions. In case the price rises from the current levels, the resistance level of 1.2745 can be considered for selling.

Alternative scenario:

if the price breaks the support level at 1.2499 and consolidates below, the downtrend will likely resume.

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 141.89
• Prev. Close: 142.16
• % chg. over the last day: +0.19%

On Friday, the yen gave up early gains and moved lower as hawkish comments from the Fed pushed the dollar higher. The Bank of Japan’s (BoJ) monetary policy meeting will take place as early as tomorrow. The BoJ is expected to maintain all monetary policy settings. But that doesn’t mean that this meeting is unimportant. Japan’s inflation continued to accelerate in October, raising the likelihood that businesses and labor unions will agree to another round of wage increases next year. And that will increase the likelihood that negative rates will soon have to be abandoned. Therefore, any signs that interest rates may move out of negative territory in the spring of 2024 could quickly bring confidence back to the Japanese currency.

Trading recommendations

• Support levels: 141.69,140.95,140.07,139.34
• Resistance levels: 143.77,144.71,145.99

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bearish. Note that Friday’s growth of the US dollar led to a fall in the quotes of the euro and pound by 0.91% and 0.71%, respectively, while the quotes of the Japanese yen fell only by 0.19%. This suggests that investors believe in the yen and bet on the normalization of monetary policy next year. At the moment, the support level of 141.71 keeps the price from falling. The MACD indicator has become inactive, with price forming a flat accumulation ahead of the BoJ meeting. Under such market conditions, sell deals can be sought from the resistance level of 143.77, provided sellers take the initiative on the lower time frames. Buying should be sought from the support level of 141.69 or 140.95, but also with confirmation from the buyers.

Alternative scenario:

if the price consolidates above the resistance level of 145.99, the uptrend will likely resume.

The XAU/USD currency pair (gold)

Technical indicators of the currency pair:

• Prev. Open: 2036
• Prev. Close: 2018
• % chg. over the last day: -0.89%

A stronger dollar on Friday put pressure on metal prices. Hawkish comments from New York Fed President Williams on Friday brought confidence back to the dollar and depressed gold prices when he dismissed speculation of a Fed rate cut as early as March. But one must realize that this is a temporary strengthening. Next year, the US Fed will cut rates by a minimum of 0.75% and a maximum of 1.5%. A rate cut leads to a fall in government bond yields, which is already happening. Gold has an inverse correlation to bond yields, so for gold, it will be a favorable period for further growth.

Trading recommendations

• Support levels: 2017,2008,1997,1987,1973
• Resistance levels: 2031,2043,2058,2081,2142

From the point of view of technical analysis, the trend on the XAU/USD is bearish. The price failed to break the priority change level on Thursday and Friday. Sellers managed to defend the level and pushed the price lower. At the moment, the price has reached the intermediate support level of 2017. As a rule, such levels give a slight bounce, after which they are broken. Therefore, the probability of another fall is extremely high. Support levels 2008 or 1996 are preferable for opening long trades. Selling can be looked for from the resistance level 2031, but also with confirmation.

Alternative scenario:

if the price breaks and consolidates above the resistance level of 2043, the uptrend will likely resume.