The Analytical Overview of the Main Currency Pairs on 2024.01.15

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0968
• Prev. Close: 1.0949
• % chg. over the last day: -0.17%

On Friday, the euro initially rose on positive economic news after French consumer spending unexpectedly rose by 0.7% m/m, which exceeded expectations of a 0.2% m/m decline and was the biggest increase in the last five months. But by the end of the day, the euro declined as the dollar’s recovery caused the liquidation of long positions in the euro. EUR/USD was also affected by dovish comments from ECB President Lagarde, who said that once the ECB’s 2% inflation target is met, she is “very confident that interest rates will start to fall.” Swaps currently estimate the odds of a 25 bps ECB rate cut at 4% at the next meeting on January 25 and 43% at the March 7 meeting.

Trading recommendations

• Support levels: 1.0938,1.0908,1.0864,1.0827
• Resistance levels: 1.0985,1.1010,1.1037,1.1080,1.1097,1.1171

The trend on the EUR/USD currency pair on the hourly time frame is a downtrend. At the moment, the price is forming a flat accumulation, and taking into account the fact that today is a bank holiday in the United States, most likely, the euro will remain trading in the range. A price consolidation above 1.0985 will open the way to 1.1010. Buying can also be looked for from the support level of 1.0938 if the price corrects today, but only with confirmation, as the level has been tested several times. Selling can be considered from 1.0985 or 1.1010, but 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: 1.2748
• Prev. Close: 1.2751
• % chg. over the last day: +0.02%

UK GDP in November 2023 grew more than expected, mainly driven by the services sector and a slight increase in manufacturing. Last month’s growth was 0.3%. However, the main concern is the quarterly data. Third quarter GDP contracted by 0.1%, and if the fourth quarter shows a negative reading, it would mean that the UK has reached a technical recession. That said, the longer-term picture shows serious problems for the growth of the economy. This will lead to the Bank of England being forced to cut rates earlier to avoid hurting the economy further. In such a situation, the British pound will be under pressure. 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: 1.2745,1.2672,1.2611,1.2572,1.2548,1.2499
• Resistance levels: 1.2787,1.2827,1.2881,1.2937

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 level of priority change at 1.2787 again and again, but each time, sellers show initiative and do not let the price consolidate above. However, the probability of priority change has increased because, with each new test of the price, the level is weakening. A breakout of 1.2787 will open the way to 1.2827. Buying should be sought from the support level of 1.2745 but with confirmation in the form of buyers’ reactions and short stop-losses.

Alternative scenario:

if the price breaks through the resistance level of 1.2787 and consolidates above it, the uptrend will likely resume.

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 145.27
• Prev. Close: 144.90
• % chg. over the last day: -0.25%

Friday’s dovish US PPI report for December reinforced expectations of a Fed rate cut, which supported the JPY. In addition, Friday’s rally in the Nikkei stock index to a 34-year-high limited demand for the yen. According to economists, Bank of Japan officials are likely to discuss lowering economic growth and inflation forecasts later this month. For the yen, again, this will be a negative factor.

Trading recommendations

• Support levels: 144.25,143.41,142.18,141.12,140.78,140.25
• Resistance levels: 145.55,145.97

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bullish. On Friday, the price tested the resistance level of 145.55 but failed to consolidate above it. At the same time, sellers showed a strong bearish reaction. Now, the price has returned to this zone again, so the probability of a decline is high. Under such market conditions, buying should be sought from the support level of 144.25 or after the price consolidation above 145.55. Selling can be considered as part of the correction from the resistance level of 145.55, but with confirmation.

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: 2027
• Prev. Close: 2048
• % chg. over the last day: +1.04%

Friday’s US PPI report was favorable for precious metals: producer prices rose less than expected, reinforcing the prospects of a Fed rate cut. In addition, escalating geopolitical risks in the Middle East spurred demand for precious metals after the US and its allies launched joint airstrikes against Houthi rebels in Yemen. The bearish factor for gold is the continued liquidation of long positions. Long positions in gold ETFs fell to a 4-year low on Thursday.

Trading recommendations

• Support levels: 2049,2042,2030,2023,2015,2008,1997,1987,1973
• Resistance levels: 2064,2072,2084,2090,2142

From the point of view of technical analysis, the trend on the XAU/USD is a downtrend. Gold showed strong growth on Friday and consolidated above the priority change level. At the moment, the price has slightly deviated from the average values, which increases the probability of a slight decline for rebalancing. Under these market conditions, buy trades can be sought from the 2049 level, but only with confirmation, as a breakdown of this level will open the price path to 2030. Selling trades are best sought after testing liquidity above 2064.

Alternative scenario:

if the price breaks and consolidates below the support level of 2013, the downtrend will likely resume.