The Analytical Overview of the Main Currency Pairs on 2024.02.12

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0776
• Prev. Close: 1.0784
• % chg. over the last day: -0.07%

The dollar declined slightly on Friday after the US Bureau of Labor Statistics left the core US Consumer Price Index for Q4 unchanged at 3.3% y/y, which is dovish for Fed policy. In addition, Friday’s rally of the S&P 500 to a new record high reduced liquidity demand for the dollar. The euro rose slightly on Friday thanks to the dollar’s weakness. In addition, hawkish comments from ECB Governing Council representative Kazaks pushed German 10-year bond yields to a 2-month high when he said that market expectations for an ECB interest rate cut this spring were too optimistic. Swaps put the odds of a 25 bps ECB rate cut at 9% at the next meeting on March 7 and 53% at the April 11 meeting. Meanwhile, the odds of a 25 bps Fed rate cut at the March 19-20 meeting are 19% and 73% for the April 30-May 1 meeting. Thus, the probabilities favor strengthening the European currency against the dollar.

Trading recommendations

• Support levels: 1.0789,1.0761,1.0721,1.0724
• Resistance levels: 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. But the price is slowly climbing up, breaking through all resistance levels. Now, the price is trying to test the liquidity above 1.0816. Therefore, buying can be considered intraday from 1.0789, but with confirmation. Selling should be regarded only after the sellers’ reaction after testing liquidity above the resistance 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: 1.2608
• Prev. Close: 1.2629
• % chg. over the last day: +0.17%

Several important reports will be published in the UK this week, from labor market and inflation data to GDP and retail sales reports. Despite inflation falling in recent months, 2 out of 9 MPC representatives voted in favor of a rate hike at the February meeting. Policymakers are concerned that the outlook for UK inflation is vulnerable to shocks, including events in the Red Sea. Overall expectations for a Bank of England rate cut have fallen again, with markets now pricing three rate cuts in 2024, down from four last week. This is a significant strengthening factor against the dollar for the British currency.

Trading recommendations

• Support levels: :1.2614,1.2571,1.2561,1.2499
• 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 hour time frame is bearish. The price is slowly correcting, forming a triangle, the upper boundary of which is the 1.2643 resistance level. A false breakout of this level may provoke a sharp wave of sell-offs. If the breakout is true, the price will easily jump up to 1.2674, and then we should also watch the reaction to the liquidity void area. Buying can be looked for intraday from the moving averages or after a liquidity test below 1.2614 followed by a buying 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: 149.26
• Prev. Close: 149.26
• % chg. over the last day: 0.0%

The JPY declined on Friday’s dovish comments from BoJ Governor Ueda, who said that financial conditions in Japan will remain favorable even after the BoJ stops negative interest rates. In addition, Friday’s rally in the Nikkei stock index to a 34-year high reduced demand for the yen as a safe haven. Swaps estimate the odds of a 10 bps rate hike from the BoJ at 32% for the next meeting on March 19 and 71% for the April 26 meeting.

Trading recommendations

• Support levels: 148.98,148.25,147.67,148.81,146.45,145.87
• Resistance levels: 149.56,149.94

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bullish. The price is trading above the moving averages and seeks to test the liquidity above 149.94. A divergence continues forming on the MACD indicator, indicating that the price may test liquidity below 148.98 before returning to the upside. Therefore, buys to continue the upward movement are best sought from 148.98, but with confirmation. There are no optimal entry points for selling right now.

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: 2035
• Prev. Close: 2024
• % chg. over the last day: -0.54%

The rise in global bond yields on Friday put pressure on the prices of precious metals. Also, Friday’s strength in global stock markets reduced demand for precious metals. In addition, hawkish comments from Atlanta Fed President Bostic and Dallas Fed President Logan on Friday depressed precious metals prices when they both said they favored waiting to cut interest rates. The bullish factor for precious metals on Friday was a weaker dollar when rising inflation expectations boosted demand for precious metals as a hedge against inflation.

Trading recommendations

• Support levels: 2020,2015,1997,1987,1973
• Resistance levels: 2027,2042,2062,2069,2084,2090

From the point of view of technical analysis, the trend on the XAU/USD is again downward. The price is trading below the moving averages. The MACD indicator is negative. Selling pressure remains, so sell trades are best sought after a liquidity test above 2027 with targets to 2020 or even 2015. There are no optimal entry points for buying right now.

Alternative scenario:

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