The Analytical Overview of the Main Currency Pairs on 2024.02.02

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0816
• Prev. Close: 1.0870
• % chg. over the last day: +0.50%

Weekly initial jobless claims in the US unexpectedly rose to a 2-month-high yesterday, while Q4 nonfarm labor productivity rose more than expected, which is dovish for Fed policy. As a result, the euro recovered from a 7-week low on Thursday and ended trading moderately higher. Economic news yesterday also contributed to the euro’s gains. Consumer prices in the Eurozone rose more than expected, a hawkish factor for ECB policy. Swaps put the odds of a 25 bps ECB rate cut at the next meeting on March 7 at 17% and at the April 11 meeting at 94%. Thus, economists expect almost 100% rate cuts from the US Fed and ECB this spring.

Trading recommendations

• Support levels: 1.0845,1.0795,1.0774
• Resistance levels: 1.0885,1.0931,1.0985,1.1010,1.1037

The trend on the EUR/USD currency pair on the hourly time frame is a downtrend, but the price is approaching the priority change level and, with a high probability, will break it. Yesterday, the price grabbed liquidity below the support level of 1.0795, which was followed by an impulsive bullish reaction. In traders’ circles, such a movement is called “initiative”. It is too late to buy, as the price is right in front of the resistance level. Therefore, it is best to consider buying on a pullback to the moving averages or from the support level of 1.0845. Selling can be considered if the price makes a false breakout of 1.0885 and closes below the level.

Alternative scenario:

if the price breaks the resistance level of 1.0885 and consolidates above it, the uptrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.2673
• Prev. Close: 1.2742
• % chg. over the last day: +0.54%

The Bank of England left rates unchanged as expected, but two out of nine representatives still voted in favor of a rate hike despite rejecting recommendations for future tightening. One representative voted in favor of a rate cut. The Central Bank also revised its inflation forecast for this year downward and removed mention of further policy tightening. However, it emphasized the need to maintain restrictive rates until inflation reaches the 2% target. Policymakers expect GDP growth to pick up gradually over the forecast period, largely reflecting a weakening of the impact on growth from previous bank rate hikes. This is positive news for the British currency.

Trading recommendations

• Support levels: 1.2697,1.2638,1.2611,1.2572,1.2548,1.2499
• Resistance levels: 1.2728,1.2764,1.2827,1.2881,1.2937

From the point of view of technical analysis, the trend on the GBP/USD currency pair on the hourly time frame is bearish, but close to change. Similar to the Eurodollar, the price also tested liquidity below the weekly low yesterday, followed by a bullish initiative. It is too late to buy as the price has deviated strongly from the mid-lines. Buying is best considered after a small pullback. The optimal support level for longs is 1.2697. Selling can be considered after a test of 1.2757 followed by a seller’s reaction, but with short targets.

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: 146.90
• Prev. Close: 146.42
• % chg. over the last day: -0.33%

The yen rose for the second day on Thursday and reached a 2-week high against the dollar. The yen found support on Thursday on the dollar’s decline as well as comments from the leader of UA Zensen, one of Japan’s largest labor unions, who said he would push for wage increases above 6%, which would add to wage pressures and is a hawkish factor that could allow the BOJ to raise interest rates.

Trading recommendations

• Support levels: 145.93,144.33,143.41,142.18
• Resistance levels: 146.67,147.45,148.74,148.41,148.81,149.33

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bullish despite the strong decline in price. Yesterday, sellers tested the liquidity below 145.93 and returned above the level. But the reaction of buyers is weak. Everything goes to the fact that after the test of 146.67, the price will continue to decline. The price going above 146.67 will open the way to 147.45.

Alternative scenario:

if the price consolidates below the support at 144.92, the downtrend will likely resume.

The XAU/USD currency pair (gold)

Technical indicators of the currency pair:

• Prev. Open: 2035
• Prev. Close: 2055
• % chg. over the last day: +0.98%

The monthly nonfarm payrolls labor market report will be released today in the US. The report is expected to show that the unemployment rate rose to 3.8% from 3.7%, and nonfarm payrolls increased by 177,000 new jobs, up from 216,000 in the previous month. Average wages are expected to rise at a 4.1% annualized rate vs. 4.0% previously. If the nonfarm data comes out better than expected, we could see the US dollar strengthen as it increases the likelihood of a soft landing for the economy and increases the odds of a rate cut further away. If the nonfarm figure comes out worse than expected, it would suggest that interest rates are having a negative impact on the labor market. In such a scenario, the dollar index will be under pressure, which in turn will give impetus to risk assets (euro, British pound), as well as stock indices and gold.

Trading recommendations

• Support levels: 2040,2031,2029,2019,1997,1987,1973
• Resistance levels: 2064,2069,2084,2090

From the point of view of technical analysis, the trend on the XAU/USD has changed to an uptrend. The price managed to consolidate above the priority change level. Yesterday, the price tested liquidity below 2031 (a little short of 2028), followed by a bullish reaction. Now, the price has tested the resistance level of 2064, but the sellers’ reaction is weak. Buying can be looked for intraday with the aim of updating the high of 2064. In case of a deeper correction, buying can be considered from the support level of 2041.

Alternative scenario:

if the price breaks below the support level in 2029, the downtrend will likely resume.