The Analytical Overview of the Main Currency Pairs on 2024.02.07

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0736
• Prev. Close: 1.0754
• % chg. over the last day: 0.17%

On Tuesday, the decline in T-note yields put pressure on the US dollar. Recent hawkish Fed comments and vital US economic news pushed back the likelihood of a Fed rate cut from the March FOMC meeting to the May meeting, which supports the dollar. The dollar weakness on Tuesday provided some support for the euro. In addition, a bullish factor for the euro was the increase in factory orders in Germany after factory orders in December unexpectedly rose to the highest level in 3 years. Currently, the probability of an ECB rate cut in March is 74%, while the likelihood of a Fed rate cut in March is 23%. The revaluation of probabilities still favours the dollar, which will put pressure on the euro.

Trading recommendations

• Support levels: 1.0721,1.0724
• Resistance levels: 1.0757,1.0783,1.0816,1.0860,1.0885,1.0931,1.0985,1.1010

The trend on the EUR/USD currency pair on the hourly time frame is a downtrend. The price has now corrected to the moving average lines, with MACD indicating weak bullish pressure inside the day. Regarding price structure, the price is testing liquidity above the 1.0757 resistance level, but there is no seller’s current reaction. If the price returns below 1.0755, selling can be considered. Also, selling can be considered after testing liquidity above 1.0783 with the subsequent reaction of sellers. There are no optimal entry points for buying.

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: 1.2528
• Prev. Close: 1.2595
• % chg. over the last day: 0.53%

There is no important economic data in the UK until February 13, when the official employment data for December will be released. Therefore, the British pound will be heavily dependent on the movement of the US dollar these days. Last week, the Bank of England was divided on what will happen next with monetary policy. Rates were left unchanged, but two MPC Committee representatives wanted to raise them, five wanted to leave them at current levels, and one wanted to lower them. It was the first three-way split in the vote since 2016. On the other hand, the near-certainty of a Federal Reserve interest rate cut in March after last week’s strong labour market report will fuel the US dollar.

Trading recommendations

• Support levels: 1.2586,1.2561,1.2499
• 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. Like the euro, the price also corrected to the moving average lines. However, the buyers managed to form an additional support zone near the level of 1.2586, and this zone can keep the price from further declining. The MACD indicator indicates moderate buying pressure intraday. With high probability, the price is looking to test the liquidity above 1.2643. A price move below 1.2586 could trigger a new wave of sell-offs.

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: 148.65
• Prev. Close: 147.93
• % chg. over the last day: 0.48%

The Japanese yen stabilised at 148 per dollar after hitting two-month lows earlier in the week. Markets remain divided on whether the Bank of Japan (BoJ) will end its negative interest rate policy this year, with the timing of such a decision constantly delayed by recent data pointing to economic problems at home. Manufacturing activity remains weak, and consumer spending is growing less than expected. Swaps estimate the odds of a 10 bps BoJ rate hike at 24% for the next meeting on March 19 and 77% for the April 26 meeting.

Trading recommendations

• Support levels: 147.67,148.81,146.45,145.87
• Resistance levels: 148.18,148.81,149.33

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bullish. Now, the price is trading below the moving averages and seeks to test the fair value area below 147.67, where the buyers may become active. A return of the price beyond the level will provide opportunities for buy trades. There are no optimal entry points for selling now. At the very least, we should wait for a test of the liquidity pocket or the fair value zone above.

Alternative scenario:

if the price consolidates below the support level at 146.45, the downtrend will likely resume.

The XAU/USD currency pair (gold)

Technical indicators of the currency pair:

• Prev. Open: 2025
• Prev. Close: 2036
• % chg. over the last day: 0.54%

The dollar’s weakening on Tuesday contributed to a slight rise in metals. In addition, Tuesday’s decline in global bond yields was favourable for precious metals. Keeping in mind that gold has an inverse correlation to bond yields. But gold’s gains are still limited as gold is still being impacted by the ongoing liquidation of long positions by funds – on Monday, the volume of long positions in ETFs fell to a 4-year low. In the medium term, gold still has all the prerequisites for growth because as soon as central banks start to cut rates, government bond yields will start to fall, increasing the prices of precious metals.

Trading recommendations

• Support levels: 2023,2019,1997,1987,1973
• Resistance levels: 2042,2062,2069,2084,2090

From the point of view of technical analysis, the trend on the XAU/USD is again downward. Now, the price is correcting and seeks to test liquidity above the resistance level 2042. Inside the day, you can look for buying with a target up to 2042 but with short-stop loss orders. If, after a test of 2042, the price comes back sharply below the level, it could trigger a wave of sell-offs.

Alternative scenario:

if the price breaks above the resistance level of 2057, the uptrend will likely resume.