The Analytical Overview of the Main Currency Pairs on 2024.01.22

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0873
• Prev. Close: 1.0896
• % chg. over the last day: +0.21%

All last week, the ECB representatives unanimously opposed the interest rate cuts. The politicians partially managed to weaken these expectations, but it should be understood that interest rates will be reduced this year by almost 100%. The only question is when and which bank will be the first to cut rates. This week on Thursday will be the first ECB meeting of the year. There is no chance of policy changes, but ECB President Lagarde’s press conference will be important in shaping expectations for the future. The swaps market believes there is about a 15% chance that the ECB will change policy in March. The first-rate cut is fully discounted for April.

Trading recommendations

• Support levels: 1.0875,1.0851,1.0827
• Resistance levels: 1.0906,1.0931,1.0985,1.1010,1.1037,1.1080,1.1097,1.1171.

The trend on the EUR/USD currency pair on the hourly time frame is a downtrend. The price reached the resistance level of 1.0906, where sellers showed a moderate reaction. If the price now closes below 1.0900, traders can consider sell deals with a target to the trend line or to the 1.0875 support level. A breakout of 1.0906 will open the way for the price to 1.0931.

Alternative scenario:

if the price breaks the resistance level of 1.0958 and consolidates above it, the uptrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.2705
• Prev. Close: 1.2701
• % chg. over the last day: -0.03%

The British pound did not change much against the US dollar over the past week, despite news of an unexpected rise in British inflation and an even more shocking decline in the country’s retail sales. In December 2023, UK retail sales fell by 2.4% compared to the same month in 2022, driven by a marked decline in sales. Sterling’s resilience can be attributed to two factors. Firstly, expectations of how the Bank of England might affect borrowing costs have not changed significantly. The market still believes that interest rates are as high as they can be. Economists still believe that the latest inflationary pressures are a temporary increase as part of a gradual downward trend.

Trading recommendations

• Support levels: 1.2682,1.2626,1.2611,1.2572,1.2548,1.2499
• Resistance levels: 1.2716,1.2787,1.2827,1.2881,1.2937.

From the point of view of technical analysis, the trend on the GBP/USD currency pair on the hourly time frame is bearish. The price corrected to the resistance level of 1.2716. The MACD indicator is in the positive zone, but the buyers’ momentum is weakening. If sellers now show a reaction, traders can consider selling to the support level of 1.2682. A breakout of 1.2716 will open the way to 1.2764 — the priority change level, which will probably lead to a change of trend.

Alternative scenario:

if the price breaks through the resistance level of 1.2764 and consolidates above it, the uptrend will likely resume.

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 148.12
• Prev. Close: 148.16
• % chg. over the last day: +0.03%

The Bank of Japan (BoJ) will hold its monetary policy meeting tomorrow. There was some speculation that the negative target overnight rate (-0.10%) would finally be lifted. However, a combination of earthquakes, weak data, and official comments dissuaded most market participants. Consensus suggests that the first steps towards policy normalization will take place in April when the results of the spring round of wage increases are tallied, and government subsidies for gas and electricity expire. Therefore, tomorrow, the Bank of Japan is expected to maintain all policy settings, which may put additional pressure on the Japanese Yen.

Trading recommendations

• Support levels: 147.55,146.97,146.39,145.45,144.33,143.41,142.18
• Resistance levels: 148.51,149.33.

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bullish. On Friday, after testing the liquidity above 148.51, the price sharply reversed, showing a bearish reaction. The corrective movement started. This time, the moving averages failed to hold the price, and now the price is flat. Under such market conditions, buy deals should be sought from the support level of 147.55 or 146.97, but only with confirmation. Selling can be considered as part of the correction from the resistance level of 148.51, but only with intraday confirmation and short targets.

Alternative scenario:

if the price consolidates below the support at 144.33, the downtrend will likely resume.

The XAU/USD currency pair (gold)

Technical indicators of the currency pair:

• Prev. Open: 2022
• Prev. Close: 2029
• % chg. over the last day: +0.34%

Markets reduced expectations of an aggressive interest rate cut in 2024, which helped the US dollar to strengthen and, thus, the US Treasury yields to stop their recent decline. A stronger US dollar makes gold more expensive for foreign buyers of the metal. In addition, yields on 2- and 10-year US Treasury bonds have risen, making gold (a non-interest-bearing asset) less attractive to investors. Late last week, it appeared that gold had gained a little support amid escalating conflict in the Middle East. But as long as officials remain convinced that the fight against inflation is not over, gold will be pressured by the rising US dollar. But looking ahead to 2024, gold still has an excellent chance to rally.

Trading recommendations

• Support levels: 2018,1997,1987,1973
• Resistance levels: 2033,2048,2064,2072,2084,2090.

From the point of view of technical analysis, the trend on the XAU/USD has changed to a downtrend. The price failed to consolidate above the 2033 level and the supply zone. The MACD indicator has become negative, and there is seller pressure inside the day. Under these market conditions, sell deals can be considered when the price consolidates below 2018. A breakdown of 2018 on impulsive moves could trigger a sharp wave of selling. Until this happens, the price could bounce from the 2018 level with a target to the moving average lines.

Alternative scenario:

if the price breaks through and consolidates above the support level of 2049, the uptrend will likely resume.