The Analytical Overview of the Main Currency Pairs on 2022.03.18

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.1030
• Prev. Close: 1.1091
• % chg. over the last day: +0.55%

Europe’s inflation rate in February reached 5.9% (previous 5.8%) in annual terms. The accelerating annual inflation rate in the Eurozone indicates rising price pressures worldwide amid strong consumer demand, high energy prices, and disruptions in the global supply chain. Economists warn that Russia’s invasion of Ukraine will cause a further increase in energy prices, leading to even higher inflation in the coming months. But ECB officials believe the situation is under control, so they do not plan to tighten monetary policy yet.

Trading recommendations

• Support levels: 1.1069,1.0917,1.0887,1.0823,1.0633
• Resistance levels: 1.1112,1.1291

From the technical point of view, the trend on the EUR/USD currency pair on the hourly time frame is still bearish, but the price has approached the priority change level. The MACD indicator has become positive, but there is a divergence towards sell deals. Under such market conditions, it is better to look for sell trades on the intraday time frames from the resistance level of 1.1112. Buy trades should be considered from the support level of 1.1069, but only with short targets.

Alternative scenario:

if the price breaks out through the 1.1112 resistance level and fixes above, the mid-term uptrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.3142
• Prev. Close: 1.3146
• % chg. over the last day: +0.03%

As expected, the Bank of England raised the interest rate by another 0.25% but kept a less hawkish tone about further increases. The current interest rate level of 0.75% is the pre-crisis value, but the inflation rate is much higher than before the pandemic. The minutes showed that if energy prices increase continues, consumer price inflation could be “several percentage points higher” than expected in February. The disruption of global supply chains could also lead to higher core commodity inflation. Thus, inflation could reach 8% in the second quarter of 2022.

Trading recommendations

• Support levels: 1.3130,1.3087,1.2989,1.2863
• Resistance levels: 1.3182,1.3274

On the hourly time frame, the GBP/USD currency pair trend is bearish, but the price is approaching the priority change level. The MACD indicator began to show a decrease in buyers pressure. Under such market conditions, buy trades should be considered from the support level of 1.3130, but better with confirmation. The best way to sell is to consider the resistance level of 1.3182, but only with confirmation in the form of the sellers’ initiative.

Alternative scenario:

if the price breaks out through the 1.3182 resistance level and fixes above, the mid-term uptrend will likely resume.

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 118.75
• Prev. Close: 118.60
• % chg. over the last day: -0.12%

On Friday, the Bank of Japan maintained its massive stimulus and warned of heightened risks to the economic recovery because of the war in Eastern Europe. The Bank of Japan kept its short-term rate target at -0.1% and the 10-year bond yield at 0%. With Japan’s inflation and wage growth lagging behind other countries, the Bank of Japan has no choice but to maintain its stimulus measures patiently. This ultra-soft policy allowed Japan’s inflation rate to rise slightly to 0.6% (previous 0.2%) on an annualized basis, but it is still well below the 2% target.

Trading recommendations

• Support levels: 118.42,117.69,117.34,116.95,116.32
• Resistance levels: 119.00

The medium-term trend on the USD/JPY currency pair is bullish. The MACD indicator is in the positive zone. There are signs of overbought and divergence, which means that a corrective move down is close. Under such market conditions, it is best to look for buy deals after a small pullback, as the price has strongly deviated from the moving averages. A support level of 117.69 would be the best, but with additional confirmation. For sell deals, the resistance level of 119.00 can be considered.

Alternative scenario:

if the price fixes below 117.34, the uptrend will likely be broken.

The USD/CAD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.2676
• Prev. Close: 1.2621
• % chg. over the last day: -0.43%

The Canadian dollar is a commodity currency, so it is highly dependent not only on the monetary policy of the Bank of Canada but also on the behavior of oil prices and the dollar index. Yesterday, oil prices rose more than 7% due to renewed focus on supply shortages due to sanctions against Russia in the coming weeks. At the same time, rising inflation in Canada increases the probability of more aggressive interest rate hikes. All these factors strengthen the Canadian currency (decrease in USD/CAD quotes).

Trading recommendations

• Support levels: 1.2555,1.2517
• Resistance levels: 1.2655,1.2713,1.2754,1.2851

In terms of technical analysis, the USD/CAD currency pair trend has changed to bearish. The price confidently broke through the priority change level and consolidated below. The MACD indicator has become negative, the sellers’ pressure has increased, but there are signs of divergence. It is worth trading only with short targets because on the USD/CAD currency pair fundamentally, there are no prerequisites for a medium-term trend, as the dollar index has the support of the Fed in the medium term. Under such market conditions, it is better to look for buy trades on the lower time frames from the support level of 1.2555, but it is better with additional confirmation. For sell deals, it is better to consider the resistance level of 1.2655.

Alternative scenario:

if the price breaks through and consolidates above 1.2754, the downtrend will likely be broken.