The Analytical Overview of the Main Currency Pairs on 2024.01.29

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0839
• Prev. Close: 1.0854
• % chg. over the last day: -0.14%

The EUR/USD pair initially fell to a 6-week low on Friday after the German Feb GfK Consumer Confidence Index unexpectedly fell to an 11-month low. But by the end of the trading day, the EUR recovered on hawkish comments from ECB Governing Council representative Kazaks, who said that the grossest mistake the ECB could make would be premature easing, which would allow inflation to bounce back. There is a lot of essential EU and German economic data coming out this week that will help determine the course of the Euro in the coming weeks. Q4 GDP data in Germany and the Eurozone is likely to show further contraction, with January inflation falling further. This will increase the likelihood of an ECB rate cut this spring and put pressure on the European currency.

Trading recommendations

• Support levels: 1.0833,1.0807
• Resistance levels: 1.0877,1.0915,1.0931,1.0985,1.1010,1.1037,1.1080.

The trend on the EUR/USD currency pair on the hourly time frame is a downtrend. On Friday, the euro reached the resistance level of 1.0877, where sellers showed a reaction. Now, the price is approaching the buyers’ zone. The support level of 1.0833 can be considered for buying, provided buyers react. A breakdown and consolidation below 1.0833 will open the way for a further decline to 1.0807. If 1.0833 holds the price, we should expect corrective rebounds to 1.0877.

Alternative scenario:

if the price breaks the resistance level of 1.0915 and consolidates above it, the uptrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.2699
• Prev. Close: 1.2700
• % chg. over the last day: +0.01%

The Bank of England will hold a monetary policy meeting this week. Some of the central bank’s policymakers are already prepared to cut rates, but the rate is likely to remain at the same level, as most of the Bank of England’s policymakers remain sternly opposed to the idea of a rate cut, citing robust inflation and soaring wage growth. But the forecast that “borrowing costs should remain restrictive for an extended period” may well be softened or abandoned altogether. Such a forecast could put pressure on sterling, but much will depend on how economists assess the chances of central banks cutting rates.

Trading recommendations

• Support levels: 1.2702,1.2667,1.2638,1.2611,1.2572,1.2548,1.2499
• Resistance levels: 1.2731,1.2764,1.2827,1.2881,1.2937.

From the point of view of technical analysis, the trend on the GBP/USD currency pair on the hourly time frame is bearish. The pound sterling found support at 1.2684 on Friday, after which the price rose sharply. Buyers formed a new level at 1.2702 to hold the price. Now, it is important to observe the price reaction here. Under these market conditions, buy trades should be expected from the support level of 1.2702 or 1.2684, but subject to buyers’ reaction to these levels. The minimum profit target is 1.2731. Selling can be sought intraday from the resistance level of 1.2731, but also with confirmation.

Alternative scenario:

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

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 147.58
• Prev. Close: 148.15
• % chg. over the last day: +0.39%

The yen moderately declined on Friday on signs of easing price pressures, which is dovish for BoJ policy after the January Tokyo CPI declined to 1.6% y/y from 2.4% y/y in December, weaker than expectations of 2.0% y/y and the slowest pace of growth in the last 22 months. Japan’s index of leading indicators for November was revised down by 0.1 to a 3-year low of 107.6 from the previously published 107.7. Swaps estimate the odds of a 10 bps BoJ rate hike at 34% at the next meeting on March 19 and 70% at the April 26 meeting.

Trading recommendations

• Support levels: 147.50,146.97,146.39,145.45,144.33,143.41,142.18
• Resistance levels: 148.26,148.81,149.33.

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bullish. The yen is gradually losing ground, and intraday buying pressure is slowly starting to prevail. On Friday, the price fumbled for support at 147.50, where buyers reacted. Market conditions point to a further rise in price. It is not a good idea to consider selling here, but the price is now at the resistance level of 148.26. A move above 148.26 will open the way to 148.81.

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: 2020
• Prev. Close: 2019
• % chg. over the last day: -0.05%

Gold gained support after Friday’s US December PCE deflator report, the Fed’s preferred inflation gauge, rose less than expected, a dovish factor for Fed policy. However, due to the continued liquidation of long positions by ETF funds, gold’s gains have been limited so far. Gold has shown limited volatility in recent trading sessions and has been going nowhere for the past two weeks, forming a flat accumulation with no discernible trend. However, things could change in the coming days as this week’s FOMC meeting will help determine the US Federal Reserve’s future policy trajectory. The US central bank is likely to leave borrowing costs unchanged but may abandon the trend towards policy tightening following the meeting.

Trading recommendations

• Support levels: 2019,1997,1987,1973
• Resistance levels: 2025,2037,2044,2064,2072,2084,2090.

From the point of view of technical analysis, the trend on the XAU/USD has changed to a downtrend. Gold is now forming a broadly volatile flat, which makes it difficult to find good entry points. A liquidity void zone is formed above the resistance level of 2025. If the price after the test of this zone returns under 2025, it may cause a wave of sell-offs with targets to 2019 or even to the renewal of the lows of the week. If the price impulsively breaks this zone, it could conversely trigger a gold rally to 2037 and higher. So we need to act here, depending on the price reaction.

Alternative scenario:

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