The Analytical Overview of the Main Currency Pairs on 2022.07.18

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0012
• Prev. Close: 1.0087
• % chg. over the last day: +0.75%

Fundamentally, the strategists of the analytical houses see no reason for the reversal of the EUR/USD quotes. The difference between the US and EU interest rates is considerable and it will increase even more this month. Moreover, there is a political crisis brewing in Europe in addition to the energy crisis. After the resignation of British Prime Minister Boris Johnson last week, and Italian Prime Minister Mario Draghi’s attempted resignation, the clouds are now gathering over German Chancellor Scholz. High inflation, falling German economic indicators, and rumors of “rape drugs” are all taking a toll on the rating of the German chancellor, who came to power just a few months ago. The European Central Bank urgently needs to get involved in the fight against inflation, otherwise, the situation in Europe may only get worse by the fall. New inflation data will be released on Tuesday this week and the ECB will hold a monetary policy meeting on Thursday where it is expected to see a 0.25% rate hike.

Trading recommendations

• Support levels: 1.0000,1.0035
• Resistance levels: 1.0147,1.0221,1.0284,1.0365,1.0415,1.050

From the technical point of view, the trend on the EUR/USD currency pair on the hourly time frame is bearish. The price increased above the psychological level of 1.00 and is now trading between the moving averages. The MACD indicator became positive, and there is slight buying pressure. Under such market conditions, sell deals can be considered from the resistance level of 1.0147, but only after the additional confirmation. Buy trades are best to look for on intraday time frames from the support level of 1.0035, but only with confirmation and short targets.

Alternative scenario:

if the price breaks out through the 1.0221 resistance level and fixes above, the uptrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.1816
• Prev. Close: 1.1868
• % chg. over the last day: +0.44%

The difference in interest rates between the US Fed and the Bank of England is not significant, but it could change a lot by the end of this month. At the moment the US Fed is holding rates at 1.75% and the Bank of England is holding rates at 1.25%. However, the US Fed is going to raise the rate by another 0.75-1% at the next meeting, while the Bank of England intends to raise the rate by only 0.25%. Such differentiation does not play in favor of the British pound. Right now the GBP/USD currency pair is trading at a 13-month low and many analysts expect a technical correction. However, fundamentally, after a small correction, traders should again expect a sell-off of the British currency amid problems in the economy of the United Kingdom, as well as due to the widening interest rate differential.

Trading recommendations

• Support levels: 1.1803
• Resistance levels: 1.1916,1.2002,1.2065,1.2137

From the technical point of view, the trend on the GBP/USD currency pair on the hourly time frame is bearish. The situation is similar to the euro. The price is trading now between the moving averages, the MACD indicator is in the positive zone, and there is slight buying pressure. Under such market conditions, sell deals can be considered from the resistance level of 1.1916, but only after the additional confirmation. Buy trades are best to look for on intraday time frames from the support level of 1.1803, but only with confirmation and short targets.

Alternative scenario:

if the price breaks out through the 1.2003 resistance level and fixes above, the uptrend will likely resume.

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 138.93
• Prev. Close: 138.45
• % chg. over the last day: -0.34%

It’s a bank holiday in Japan today, so the volatility on the USD/JPY currency pair will be less than usual. There are no fundamental changes here at the moment. The Bank of Japan keeps its soft monetary policy, while the US Federal Reserve is on the way to aggressive interest rate hikes. Such a diametrically opposite policy has already pushed USD/JPY up to 24-year highs. And at least until the end of summer, the monetary policy of the Central Banks in Japan and the US will remain unchanged.

Trading recommendations

• Support levels: 138.12,137.70,137.12,136.48,135.92,135.40,134.64,134.11
• Resistance levels: 138.71,140.29

From the technical point of view, the medium-term trend on the USD/JPY currency pair is bullish. Indicator MACD has become negative, the buyers’ pressure has decreased, and the price has corrected to the average values. Under such market conditions, it is best to look for buy deals within a day from the support level of 138.12 or 137.70, but with confirmation. A resistance level of 138.71 may be considered for sell deals, but only with additional confirmation and short targets.

Alternative scenario:

If the price fixes below 136.48, the downtrend will likely resume.

The USD/CAD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.3115
• Prev. Close: 1.3019
• % chg. over the last day: -0.73%

Wholesale sales in Canada increased by 1.6% in May to $81.1 billion, the eighth increase in the last ten months. Sales increased in five of the seven wholesale sub-sectors, accounting for 70% of wholesale sales. This is good data for the economy and the Canadian dollar, in general. But keep in mind that the Canadian dollar is a commodity currency and is also dependent on the US Dollar Index, and oil prices. On Friday, the US Dollar Index decreased, while oil prices went up, which added some confidence to the Canadian currency.

Trading recommendations

• Support levels: 1.2987,1.2959,1.2934
• Resistance levels: 1.3106,1.3154,1.3236

In terms of technical analysis, the trend on the USD/CAD currency pair is bullish. But on Friday the price corrected to the average values, and the MACD indicator became negative. Under such market conditions, it is best to look for buy trades on the lower time frames after a slight pullback to the support level of 1.2987 or 1.2959, but with confirmation. For sell deals, it is best to consider the resistance level of 1.3106, but it is also better with confirmation and short targets.

Alternative scenario:

if the price breaks through and consolidates below the 1.2934 support level, the downtrend will likely resume.