The Analytical Overview of the Main Currency Pairs on 2023.01.13

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0754
• Prev. Close: :1.0850
• % chg. over the last day: +0.89%

The US consumer price Index decreased from 7.1% to 6.5% (forecast 6.5%) annually. Core inflation (which excludes food and energy prices) also slowed y/y from 6% to 5.7% (forecast 5.7%). Lower inflationary pressures have increased bets that the Federal Reserve will move to a slower rate of increase. Economists expect the Central Bank to announce a 25 basis point rate hike at its next meeting on February 1. This has caused the dollar to sell off and investors to move into riskier assets such as the euro and pound.

Trading recommendations

• Support levels: 1.0830,1.0776,1.0650,1.0597,1.0535,1.0497,1.0480
• Resistance levels: 1.0875

The trend on the EUR/USD currency pair on the hourly time frame is still bullish. The price is trading above the moving averages. The MACD indicator is in the positive zone, but there are signs of divergence, which means that price growth is limited, and a correction should be expected to find good entry points. Under such market conditions, buy trades are best considered from the support level of 1.0830 or 1.0776 with confirmation on intraday time frames. Sell deals can be considered from the daily resistance level of 1.0875, but better with confirmation in the form of a reverse initiative or a false breakout.

Alternative scenario:

if the price breaks down through the support level of 1.0700 and fixes below it, the downtrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.2147
• Prev. Close: 1.2211
• % chg. over the last day: +0.53%

The Bank of England said yesterday that it had completed its £19.3 billion sale of UK government bonds as an emergency measure to stabilize markets, which it began in the fall of 2022. The UK Central Bank said that it has now sold all the bonds it bought under the program. This is a positive factor for the British pound. But there is also a negative side — the Bank of England spokesperson Mann said yesterday that the underlying inflation dynamics look steady.

Trading recommendations

• Support levels: 1.2080,1.2000,1.1928,1.1875,1.1684,1.1476,1.1418
• Resistance levels: 1.2238,1.2308,1.2431,1.2519

From the technical point of view, the trend on the GBP/USD currency pair on the hourly time frame is bullish. The price is already trading in a wide price range above the moving averages. The MACD indicator is in the positive zone, but the presence of divergence on several timeframes will limit the growth. Under such market conditions, it is better to look for buy trades on intraday time frames from the support level of 1.2080 or 1.1999, but with confirmation. Sell trades are best sought from the resistance level of 1.2238 but also better with confirmation in the form of a false breakout or a change of structure on the lower time frames.

Alternative scenario:

if the price breaks down through the 1.2080 support level and fixes above it, the downtrend will likely resume.

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 132.41
• Prev. Close: 129.32
• % chg. over the last day: -2.39%

A decline in inflation in the US led to a drop in the dollar Index, which allowed the Japanese Yen to strengthen significantly. But it should be noted that the interest rate differential between the US Fed and the Bank of Japan is not narrowing and will widen further when the Fed hikes on February 1. There are no fundamental factors for further appreciation in JPY now. Still, they might appear at any time, as investors expect the new governor of BoJ to change the monetary policy towards higher rates.

Trading recommendations

• Support levels: 128.85
• Resistance levels: 129.65,131.12,132.36,133.23,134.45,135.88,137.03

From the technical point of view, the medium-term trend on the currency pair USD/JPY has changed to bearish. The price has consolidated below the priority change level and is trading below the moving averages. The MACD indicator has become negative again, but there are the first signs of oversold. Also, on the higher time frames, there is a divergence. It is better to buy from the support level of 128.85, but only with intraday confirmation and with short targets. Sell deals can be looked for from the resistance level of 129.65 or 131.12 under the condition of a reverse reaction or false breakout.

Alternative scenario:

If the price fixes above the resistance level of 132.36, the uptrend will be renewed with a high probability.

The USD/CAD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.3418
• Prev. Close: 1.3367
• % chg. over the last day: -0.38%

Oil prices continue to rise amid falling inflation in the US, as well as the opening of China. The Canadian dollar is a commodity currency, so rising oil prices combined with a falling dollar lead to a strengthening of the Canadian currency. Goldman Sachs analysts forecast oil prices to rise above $100 per barrel by the third quarter of 2023, which could be a trigger for the formation of a medium-term downward trend on the USD/CAD currency pair.

Trading recommendations

• Support levels: 1.3362,1.3212
• Resistance levels: 1.3492,1.3513,1.3561,1.3594,1.3632,1.3700

From the point of view of technical analysis, the trend on the USD/CAD currency pair is bearish. The price is already trading in a wide price corridor. The MACD indicator is in the negative zone with signs of divergence. Under such market conditions, buy trades should be considered from the support level of 1.3362, but only with short targets and confirmation. Sell deals are better to look for on the intraday time frames from the resistance level of 1.3492 or 1.3513, but with a confirmation in the form of a reverse initiative on the lower time frames or a false breakout.

Alternative scenario:

if the price breaks out and consolidates above the resistance level of 1.3500, the uptrend will likely resume.