The Analytical Overview of the Main Currency Pairs on 2022.12.05

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0525
• Prev. Close: 1.0539
• % chg. over the last day: +0.13%

On Friday, investors were looking for signs of weakness in the US labor market, especially wages, as a precursor to a faster slowdown in inflation, which would allow the Fed to slow down and eventually halt its current rate hike cycle. But the NFP data surprised again, and the October data was revised upward, highlighting that the US labor market continues to show signs of high resilience despite tightening financial conditions. This, in turn, gives the Fed room for another major hike, although there is less than a 20% chance of such a scenario.

Trading recommendations

• Support levels: 1.0543,1.491,1.0446,1.0361,1.0332,1.0284,1.0193
• Resistance levels: 1.0610

The trend on the EUR/USD currency pair on the hourly time frame is bullish. The price is trading above the moving averages, and the MACD indicator is in the positive zone, but with signs of stopping in the form of divergence. Buy trades are best considered after a slight correction to the support levels of 1.0543 or 1.0491, but with additional confirmation. Sell deals can be considered from the resistance level of 1.0610, but it is better with confirmation in the form of reverse initiative.

Alternative scenario:

if the price breaks down through the support level of 1.0332 and fixes below it, the downtrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.2242
• Prev. Close: 1.2291
• % chg. over the last day: +0.40%

Financial markets gave British Prime Minister Rishi Sunak a pretty easy start. The Bank of England will meet for the last time this year on December 15. Swati Dhingra of the bank’s monetary policy committee said late last week that the Bank of England’s benchmark interest rate must peak no higher than 4.5% if the central bank wants to avoid a deepening and prolonged recession. For now, the Bank of England is holding the rate at 3%, compared with the RBNZ’s 4.25%, the US Fed’s 4.00%, and the Bank of Canada’s 3.75%.

Trading recommendations

• Support levels: 1.2224,1.2016,1.1964,1.1684,1.1476,1.1418
• Resistance levels: 1.2381,1.2431

From the technical point of view, the trend on the GBP/USD currency pair on the hourly time frame is bullish. The price is trading above the moving levels. The MACD indicator is in the positive zone, and there are signs of divergence, which indicates the weakness of the buyers. Under such market conditions, it is better to look for buy deals from the support level of 1.2224, but with confirmation. Sell trades are best to look for on intraday time frames from resistance levels of 1.2381, but also better with confirmation in the form of a reverse initiative or a false breakdown.

Alternative scenario:

if the price breaks down of the 1.1965 support level and fixes below it, the downtrend will likely resume.

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 135.28
• Prev. Close: 134.31
• % chg. over the last day: -0.72%

As market participants focused on strong wage growth and solid US employment data, the USD/JPY pair jumped on Friday after the NFP release. However, another 50 basis point hike is expected at the December FOMC meeting. Given that the Bank of Japan will maintain an ultra-soft policy at least until spring 2023, analysts expect a new wave of USD/JPY growth amid a widening of the difference between the interest rates of the US Federal Reserve and the Bank of Japan.

Trading recommendations

• Support levels: 135.20,133.53
• Resistance levels: 137.65,139.09,140.75,143.17,145.16

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bearish. The MACD indicator is in the negative zone, but on the higher time frames, the divergence is formed, which indicates the weakness of the sellers. Under such market conditions, buy trades can be sought on the intraday time frames from the support level of 134.26, but only with confirmation, since the level has already been tested. Sell deals could be sought from the resistance level of 135.11 or 137.65, provided there is a reversal.

Alternative scenario:

If the price fixes above 139.08, the uptrend will likely resume.

The USD/CAD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.3430
• Prev. Close: 1.3471
• % chg. over the last day: +0.31%

The Bank of Canada has a tough decision to make at its upcoming policy meeting on December 7. Governor Tiff Macklem argues that further rate hikes are needed to bring inflation under control, but the central bank is facing criticism as there are signs of a slowing economy. Therefore, it is very likely that the Bank of Canada will raise the rate by 0.25%. But there could be surprises, as Tiff Macklem wants to keep up with the US Fed, and the US central bank is planning a 0.5% rate hike. Robust employment data could justify a potential 50 basis point hike by the Bank of Canada.

Trading recommendations

• Support levels: 1.3386,1.3360,1.3281,1.3212
• Resistance levels: 1.3446,1.3479,1.3522,1.3658,1.3682,1.3776,1.3855

From the point of view of technical analysis, the trend on the USD/CAD currency pair has changed to bullish. The price failed to break down through the priority change level. The MACD indicator is in the negative zone, but sellers’ pressure is weak. Buy trades should be considered on the lower time frames from the support level of 1.3386, but with additional confirmation. For sell deals, it is better to consider the resistance level of 1.3446 but with confirmation in the form of reverse initiative.

Alternative scenario:

if the price breaks down and consolidates below the support level of 1.3386, the downtrend will likely resume.