The Analytical Overview of the Main Currency Pairs on 2022.09.08

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 0.9903
• Prev. Close: 0.9903
• % chg. over the last day: +0.91%

The ECB will hold its monetary policy meeting today, where analysts expect to see an excessive interest rate hike of 0.75%. And given the euro strengthening yesterday, there is every reason to believe that investors are already buying European currencies in the expectation that the ECB will hold an aggressive rate hike, unusual for itself. But many analysts believe it is too early to consider the euro as an investment, as the euro is still under a lot of pressure due to fears of recession, the conflict in Ukraine, and the energy shock. Also, it should be noted that the US Federal Reserve will also raise the rate by 0.5-0.75% at its next meeting, so the interest rate differential between the Fed and the ECB will continue to put downward pressure on the EUR/USD quotes.

Trading recommendations

• Support levels: 0.9953,0.9929,0.9912.
• Resistance levels: 1.0016,1.0046,1.0077,1.0111,1.0150

From the technical point of view, the trend on the EUR/USD currency pair on the hourly time frame is bearish. EUR/USD quotes are trading near parity again. Technically, there is a formation of a wide balance with a range of 0.9912-1.0077. The MACD indicator became positive, and the price returned to the range, forming a false breakdown zone below. Under such market conditions, buy trades are best to look for on intraday time frames from the support level of 0.9953 or 0.9929. Sell trades can be considered from resistance levels of 1.0016 or 1.0046, but only after the additional confirmation.

Alternative scenario:

if the price breaks out of the 1.0047 resistance level and fixes above, the uptrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.1516
• Prev. Close: 1.1516
• % chg. over the last day: 0.00%

The plan of the new British Prime Minister Liz Truss was well received by the British pound yesterday. According to preliminary information, the new government plans to freeze Britain’s energy bills, which will cost the country 130 billion pounds. According to analysts, it will give a temporary boost to the British currency. Onward everything depends on the actions of the Bank of England.

Trading recommendations

• Support levels: 1.1449,1.1400
• Resistance levels: 1.1561,1.1669,1.1816,1.1901,1.1994,1.2035,1.2167

From the technical point of view, the trend on the GBP/USD currency pair on the hourly time frame is bearish. At the moment, the price is trading at the level of moving averages, and the MACD indicator is positive again. It is best to look for sell trades on intraday time frames, the nearest resistance level is 1.1561. Buy trades can be considered from the support level of 1.1449, but only with confirmation.

Alternative scenario:

if the price breaks out through the 1.1670 resistance level and fixes above, the uptrend will likely resume.

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 142.70
• Prev. Close: 143.74
• % chg. over the last day: +0.72%

From a fundamental point of view, the situation remains the same. With inflation in Japan still subdued, traders are betting that the Bank of Japan will not lift a finger to stop the yen’s fall. Most importantly, wage growth and inflation expectations remain subdued, so it does not look like inflation will take root. Consequently, the Bank of Japan is convinced that this is a global supply shock that will soon dissipate. The Japanese yen has already lost 25% of its value against the dollar index this year. With regard to the implementation of currency intervention, such a move now seems unrealistic. First, Japan would have to intervene alone, because neither Europe nor the US would agree to loosen its monetary policy now. Second, individual intervention implies a lower probability of success, requiring tons of foreign exchange reserves, and may even have unpleasant consequences.

Trading recommendations

• Support levels: 142.83,141.77,141.00,139.61,138.78,137.65,136.80,135.20
• Resistance levels: 145.00

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bullish. The price is trading above the average lines, and the buyers’ pressure is still there. The MACD indicator remains positive, there is no sign of reversal. Under such market conditions buy trades can be sought from the support level of 142.83 or 141.77, but with additional confirmation. Sell deals can be considered on the intraday time frames from the psychological level of 145.00, but only with additional confirmation, as fundamentally, USD/JPY quotes are inclined to grow.

Alternative scenario:

If the price fixes below 141.00, the downtrend will likely resume.

The USD/CAD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.3151
• Prev. Close: 1.3118
• % chg. over the last day: -0.25%

The Bank of Canada held its fourth consecutive interest rate hike in an attempt to lower inflation from a four-year high. Policymakers led by Governor Tiff Macklem raised the benchmark overnight rate by 75 basis points to 3.25% on Wednesday, giving Canada’s Central Bank the highest interest rate among major advanced economies. At the same time, officials said they expect rate hikes to continue in the coming months, but the next hikes are likely to have a small adjustment.

Trading recommendations

• Support levels: 1.3077,1.3020,1.2989,1.2958,1.2936,1.2900
• Resistance levels: 1.3220

From the point of view of technical analysis, the trend on the USD/CAD currency pair is bullish. The price is now trading below the moving averages, the MACD indicator has become negative, and there is some seller pressure, but the latent divergence indicates that the price is difficult to move lower. Under such market conditions, buy trades should be considered on the lower time frames from the support level of 1.3077, but only with confirmation. The best way to sell is to consider the resistance level of 1.3220, but only after a false breakout, as the level has already been tested and a lot of liquidity has been formed above the level.

Alternative scenario:

if the price breaks down and consolidates below the 1.3077 support level, the downtrend will likely resume.