The Analytical Overview of the Main Currency Pairs on 2023.12.26

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.1009
• Prev. Close: 1.1013
• % chg. over the last day: +0.04%

Thursday’s US GDP data and Friday’s PCE Core data failed to meet expectations. Both of these releases contributed to the dollar’s decline. Market participants continue to build up expectations of a rate cut from the US Federal Reserve. Market participants currently estimate the probability of a Fed rate cut in March 2024 at 78%. At the same time, swaps estimate the chances at 3% of a 25 bps ECB rate cut at the next meeting on January 25 and 60% at the March 7 meeting. Thus, both central banks intend to cut rates in the spring, so fundamentally, both currencies will be balanced against each other.

Trading recommendations

• Support levels: 1.0954,1.0929,1.0906,1.0891,1.0827,1.0791,1.0766,1.0728
• Resistance levels: 1.1023,1.1046,1.1100

The trend on the EUR/USD currency pair on the hourly time frame is bullish. At the moment, the price has almost reached the important resistance level of 1.1046, and there is a reaction of sellers inside the day. A divergence is forming on the MACD indicator, which indicates a high probability of a corrective wave. Under such market conditions, buy trades can be considered from the support level of 1.0954 but are subject to buyers’ reaction. Sell deals can be sought from the resistance level of 1.1023 or 1.1046, but also with confirmation and short targets, as these will be positions against the trend. Also, do not count on big moves in the week before New Year’s Eve — volatility is usually low during this period.

Alternative scenario:

if the price breaks the support level at 1.0888 and consolidates above it, the downtrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.2680
• Prev. Close: 1.2697
• % chg. over the last day: +0.13%

The UK is getting closer to a technical recession. Revised GDP data showed that the economy contracted in the previous quarter. According to the Office for National Statistics, the UK GDP contracted by 0.1% between July and September, revising the previous estimate. In the last three months, economic growth came in at zero. The data could put further pressure on the Bank of England, forcing it to cut interest rates earlier than planned in an attempt to support the weakening economy.

Trading recommendations

• Support levels: 1.2676,1.2641,1.2613,1.2572,1.2548,1.2499
• Resistance levels: 1.2761,1.2796

From the point of view of technical analysis, the trend on the GBP/USD currency pair on the hourly time frame is bullish. The British pound is starting to lose ground compared to the euro. At the moment, the price is trading near the moving averages. The support level of 1.2676 does not allow the price to decline, while the resistance level has not been reached yet. Buying is best looked for on intraday time frames. The level of 1.2761 can be considered for selling, provided the sellers react accordingly.

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: 142.10
• Prev. Close: 142.43
• % chg. over the last day: +0.23%

Last week, the strength of the Japanese yen weakened as the Bank of Japan (BoJ) stance and falling inflation put an end to speculations that a policy turnaround was on the horizon. This week, volatility in the JPY will be weak but higher than in the EUR and USD. At the same time, the Japanese yen may lose more positions if the inflation data from the Bank of Japan does not show signs of growth.

Trading recommendations

• Support levels: 141.91,141.44,140.95,140.07,139.34
• Resistance levels: 142.64,143.32,143.98,144.71,145.99

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bearish. The price is trading in the 141.91-142.64 range, forming a flat accumulation. The MACD indicator has become inactive. Under such market conditions, sell deals can be sought from the resistance level of 142.64, provided sellers take the initiative on the lower time frames. Buying should be sought from the support level at 141.91, but also on the condition of reaction from buyers, as the level has already been tested. A breakdown/breakout of one of the boundaries will open the way to the next level.

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: 2049
• Prev. Close: 2053
• % chg. over the last day: +0.19%

A favorable US deflator report supported gold prices on Friday, which turned out to be dovish for the Fed’s policy. The report showed that the Federal Reserve’s preferred measure of PCE inflation slowed more than economists expected to 2.6% y/y in November from 2.9% y/y a month earlier. The weakening US dollar and lower US Treasury bond yields increase the attractiveness of gold, so we can expect a new attempt to reach the December price high in early 2024.

Trading recommendations

• Support levels: 2055,2046,2034,2027,2015,2008,1997,1987,1973
• Resistance levels: 2066,2081,2142

From the point of view of technical analysis, the trend on the XAU/USD is bullish. But on Friday, the price reached the resistance level of 2066, where sellers showed a moderate reaction. Support level 2055 can be considered as support for further growth, but the price may correct to 2046. A move below 2046 is undesirable for buyers, as it may trigger a wave of sell-offs. Selling can be looked for from the resistance level of 2066, but only with confirmation. Intraday selling should be done only with short targets, as these will be positions against the main trend.

Alternative scenario:

if the price breaks below the support level of 2015, the downtrend is likely to resume.