The Analytical Overview of the Main Currency Pairs on 2024.01.23

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0889
• Prev. Close: 1.0881
• % chg. over the last day: -0.07%

Last week, a series of hawkish comments from ECB officials tempered expectations of a rate cut soon, leading markets to expect the ECB to cut rates by around 130 basis points this year. Minutes from the ECB’s December meeting showed officials’ confidence that inflation would return to the target but emphasized the need to maintain a restrictive policy for some time, reflecting differing views on the timing of reaching that target. Traders will be keeping a close eye on flash PMI data due out on Wednesday and the European Central Bank’s upcoming interest rate decision on Thursday. Although the ECB is expected to keep monetary policy unchanged, the focus will be on President Christine Lagarde’s speech to get any signals on the possible timing of interest rate cuts.

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 euro exchange rate is almost unchanged and is trading near $1.09. The price is forming a flat accumulation in the range of 1.0875-1.0906, so the most logical option would be to trade inwards from these boundaries. If the price closes above 1.0906, traders can consider buying with a target of 1.0931. A breakdown of 1.0875 will open the way to 1.0851.

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: 1.2679
• Prev. Close: 1.2708
• % chg. over the last day: +0.23%

The British pound stabilized at $1.27 as investors await the upcoming PMI data and the Bank of England’s decision, which is due at the end of the month amid concerns over the slowing British economy and persistent inflation. Data released last week showed that UK retail sales fell by 3.2% in December, the biggest drop since January 2021 and exceeding forecasts of a 0.5% fall, raising the risk that the economy will enter recession in the fourth quarter. Meanwhile, the Consumer Price Index report showed an unexpected rise in Britain’s inflation rate to 4%, while the UK employment report pointed to a sharp slowdown in wage growth and a continued decline in vacancies.

Trading recommendations

• Support levels: 1.2714,1.2682,1.2626,1.2611,1.2572,1.2548,1.2499
• Resistance levels: 1.2764,1.2827,1.2881,1.2937.

From the point of view of technical analysis, the trend on the GBP/USD currency pair on the hourly time frame is bearish, but the price is approaching the priority change level, while on the intraday time frames, there is a bullish rally. The price broke the resistance level and rallied towards 1.2764. The MACD indicator is in the positive zone, and momentum is behind the buyers, but there are the first signs of divergence. If sellers now show a reaction from the trend channel boundary, it should be considered as a correction to the moving averages.

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: 148.25
• Prev. Close: 148.09
• % chg. over the last day: -0.10%

On Tuesday, the Bank of Japan (BoJ) maintained all monetary policy settings but slightly lowered its inflation forecast for FY 2024 from 2.8% to 2.4%. In a statement on Tuesday, the BoJ said it expects consumer price index (CPI) inflation to maintain its trend above the 2% annual target through fiscal 2024 and that inflation will only start to decline by fiscal 2025. BoJ policymakers also forecast core CPI inflation in a narrower range for 2025. The softer near-term inflation forecasts come amid a steady decline in Japanese inflation in recent months. However, the BoJ believes that this decline will be limited as the cost of services remains high and past increases in import prices are already embedded in the economy.

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. However, the resistance level of 148.51 turned out to be impregnable for the price. After three tests, the price bounced lower, which opened up excellent opportunities to join the upward movement. Under such market conditions, buying 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 148.51 resistance level, 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: 2028
• Prev. Close: 2021
• % chg. over the last day: -0.34%

Gold rose to 2030 dollars per ounce on Tuesday, rebounding from the previous session’s losses as the dollar weakened from recent highs. In addition, lower government bond yields on Monday lent support to gold. Investors continue to assess the outlook for monetary policy globally. The European Central Bank will decide on monetary policy later this week and is expected to counter bets on lower interest rates. In the US, investors await data on private sector activity, GDP, and PCE inflation this week ahead of next week’s Federal Reserve meeting.

Trading recommendations

• Support levels: 2018,1997,1987,1973
• Resistance levels: 2033,2044,2064,2072,2084,2090.

From the point of view of technical analysis, the trend on the XAU/USD has changed to a downtrend. The price is trading in the 2018-2033 range and is now testing the upper boundary again. The MACD indicator is pointing to stronger buying, but volumes are declining. With these market conditions, selling can be considered when sellers react to the resistance level of 2033. A breakout of 2033 on an impulsive move could trigger a sharp rally to 2044.

Alternative scenario:

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