The Analytical Overview of the Main Currency Pairs on 2022.09.19

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 0.9995
• Prev. Close: 1.0014
• % chg. over the last day: +0.19%

The annualized Consumer Price Index in the Eurozone reached 9.1% (vs. 8.9% in July). A year earlier, it was 3.0%. Inflation in the Eurozone shows no signs of slowing down thus far. ECB member Nagel said Friday that the ECB would continue to raise rates to control inflation. Another ECB official, Ren, also agrees that the ECB needs to keep raising rates.

Trading recommendations

• Support levels: 0.9971,0.9912.
• Resistance levels: 1.0111,1.0162,1.0230

From the technical point of view, the trend on the EUR/USD currency pair on the hourly time frame is bullish. On Friday, the price formed a false breakdown area below the level of 0.9971. Now this zone can be used to search for buy trades, but with confirmation. The MACD indicator has become positive, with a slight buying pressure. Sell trades can be considered from resistance levels of 1.0111 or 1.0162.

Alternative scenario:

if the price breaks down through the support level of 0.9912 and fixes below, the downtrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.1462
• Prev. Close: 1.1418
• % chg. over the last day: -0.38%

The UK Retail Sales Data released Friday underscored that consumers are struggling. According to the Office for National Statistics, retail sales fell by 1.6% in August, continuing a downward trend since the summer of 2021. The British pound remains under pressure ahead of this week’s decision by England’s Central Bank. In turn, the UK Central Bank is in an awkward situation, as it will announce its decision one day before new Chancellor Kwasi Kwarteng unveils an emergency mini-budget. Analysts expect the Bank of England to raise interest rates by 0.5% this week, the last rate hike in the UK this year.

Trading recommendations

• Support levels: 1.1400
• Resistance levels: 1.1449,1.1626,1.1693,1.1816,1.1901,1.1994,1.2035,1.2167

From the technical point of view, the trend on the GBP/USD currency pair on the hourly time frame has changed to bearish. At the moment, the price is trading below the moving averages, and the MACD indicator is in the negative area, but there are signs of divergence. It is possible that the price is now forming a false-breakdown area, which can be used as support if the price again consolidates above the level of 1.1449. Sell trades are better to consider on the intraday time frames, and the nearest resistance is 1.1626.

Alternative scenario:

if the price breaks out of the 1.1693 resistance level and fixes above it, the uptrend will likely resume.

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 143.41
• Prev. Close: 142.91
• % chg. over the last day: -0.34%

Japan will release inflation data this week, and the Core Consumer Price Index (which excludes food and energy prices) is expected to rise from 2.4% to 2.7% in annual terms. But analysts are confident that rising inflation in Japan will not affect the Japanese yen much. That’s because there is a consensus that the Bank of Japan will not change policy at its meeting later this week. After all, the inflation Japan is experiencing is the “wrong” inflation. This inflation is not caused by an increase in monetary circulation due to economic growth but by a combination of higher global costs and higher import prices due to a weak currency. While raising rates would help reduce some of the impacts of inflation, it would damage an economy that is already not very healthy. Therefore, the Bank of Japan will continue to seek further easing.

Trading recommendations

• Support levels: 142.57,141.77,141.00,139.61,138.78,137.65,136.80,135.20
• Resistance levels: 144.21,145.00

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bullish. The price is trading at the level of moving averages. The MACD indicator has become inactive. Under such market conditions, buy trades can be sought from the support level of 142.57, but with additional confirmation. Sell deals can be considered on intraday time frames from the resistance level of 144.21 or 145.00, but only with additional confirmation since the USD/JPY is fundamentally 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: 1.3226
• Prev. Close: 1.3263
• % chg. over the last day: +0.28%

The Canadian dollar fell to its lowest level in nearly two years as investors worldwide assessed the deteriorating economic outlook and returned to haven currencies such as the US dollar. Persistently high US inflation increases the likelihood that the country’s Central Bank will have to raise interest rates even more aggressively than before. Another reason for the relative weakness of the Canadian dollar is the decline in commodity prices such as oil and gold. All else being equal, a higher interest rate increases the value of the national currency because foreign investors find it more profitable to put their money there: they get a higher return for it. Suppose the Fed’s rate rises to 4.5% next year, as investors expect. In that case, that is much higher than the Bank of Canada is likely to be able to raise, so the gap between the two countries’ currencies will widen, which is already putting pressure on the Canadian dollar.

Trading recommendations

• Support levels: 1.3220,1.3053,1.2990,1.2958,1.2936,1.2900
• Resistance levels: 1.3326

From the point of view of technical analysis, the trend on the USD/CAD currency pair is bullish. The price is trading above the moving averages, and the MACD indicator is in the positive zone, but there are the first signs of divergence. Under such market conditions, buy trades should be considered on the lower time frames from the support level of 1.3220. For sell deals, it is better to consider the resistance level of 1.3326, but only after an additional confirmation in the form of a false breakout.

Alternative scenario:

if the price breaks down and consolidates below the 1.2990 support level, the downtrend will likely resume.