The Analytical Overview of the Main Currency Pairs on 2024.02.05

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0871
• Prev. Close: 1.0786
• % chg. over the last day: -0.78%

The Dollar Index rose to a 7-week high on Friday, gaining 0.82% as bond yields rose on the back of a stronger-than-expected US payrolls report for January. The report indicates a strengthening labor market, which is hawkish for Fed policy and pushes back expectations of a Fed rate cut. The dollar continued to rise after the University of Michigan’s consumer sentiment index for January was revised upward to a 2-year high. Markets estimate the probability of a 25 bps rate cut at the March 19-20 FOMC meeting at 22% and the probability of the same 25 bps rate cut at the April 30-May 1 meeting at 89%.

Trading recommendations

• Support levels: 1.0772,1.0704
• Resistance levels: 1.0816,1.0860,1.0885,1.0931,1.0985,1.1010,1.1037.

The trend on the EUR/USD currency pair on the hourly time frame is a downtrend. The price failed to consolidate above the priority level change. On Friday, the price grabbed the liquidity above the resistance level of 1.0885, followed by an impulsive bearish reaction. The price has now reached the 1.0772 support level. Buying can be considered here on intraday time frames. Sell deals can be considered after a pullback to the moving averages or after a liquidity test above 1.0816.

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: 1.2740
• Prev. Close: 1.2630
• % chg. over the last day: -0.87%

The British Pound returned below $1.27, at its weakest level since January 17, as investors dampened expectations of an interest rate cut by the Federal Reserve after data showed that the US economy added more jobs than expected in January. On Thursday, the Bank of England kept interest rates at a near 16-year high but opened the possibility of cutting them in response to lower inflation. Policymakers forecast that the consumer price index (CPI) will temporarily fall to a target of 2% in the second quarter of 2024 before rising again in the third and fourth quarters.

Trading recommendations

• Support levels: 1.2608,1.2572,1.2548,1.2499
• Resistance levels: 1.2643,1.2674,1.2750,1.2827,1.2881,1.2937.

From the point of view of technical analysis, the trend on the GBP/USD currency pair on the hourly time frame is bearish. Similar to the Eurodollar, the price-tested liquidity was above 1.2750 on Friday, after which there was a bearish initiative. The price has now declined to the support level of 1.2608. Buying is best considered intraday but with short targets. Selling can be considered after a liquidity test above 1.2643, followed by a sellers’ reaction.

Alternative scenario:

if the price breaks the resistance level at 1.2750 and consolidates above it, the uptrend will likely resume.

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 146.34
• Prev. Close: 146.33
• % chg. over the last day: +1.35%

The yen fell to a 1.5-week low against the dollar on Friday as T-note bond yields rose on the back of a stronger-than-expected US payrolls report for January. Weakness in Japanese government bond yields also weighed on the yen, with the 10-year JGB yield falling to a 1-week low of 0.665% on Friday. Swaps estimate the odds of a 10 bps BoJ rate hike at 20% at the next meeting on March 19 and 75% at the April 26 meeting.

Trading recommendations

• Support levels: 148.21,147.67,148.81,145.87
• Resistance levels: 148.81,149.33

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bullish. On Friday, buyers took the initiative from the support level of 145.87. Now, the price has reached the resistance level of 148.81, where sellers show some activity. Everything goes to the fact that after a small pullback, the price will continue the upward movement. Optimal levels for buying are 148.21 and 147.67, but with confirmation.

Alternative scenario:

if the price consolidates below the support at 145.878, the downtrend will likely resume.

The XAU/USD currency pair (gold)

Technical indicators of the currency pair:

• Prev. Open: 2056
• Prev. Close: 2040
• % chg. over the last day: -0.78%

Gold has an inverse correlation to the US government bond yields. Friday’s stronger-than-expected US January payrolls report pushed the dollar to a 7-week high, which depressed the prices of precious metals. Meanwhile, Friday’s rally of the S&P 500 to a record high limited demand for precious metals from safe-haven investors. Gold was also weakened by continued liquidation of long positions by funds after long positions in gold ETFs fell to a 4-year low on Thursday.

Trading recommendations

• Support levels: 2031,2029,2019,1997,1987,1973
• Resistance levels: 2042,2062,2069,2084,2090.

From the point of view of technical analysis, the trend on the XAU/USD is bullish but close to change. Buyers need to prevent sellers from consolidating below 2029. Holding the price below 2029 will open the way to 2020 or even lower. If buyers manage to push the price away from 2031, we should expect a rise to 2042.

Alternative scenario:

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