The Analytical Overview of the Main Currency Pairs on 2023.02.03

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0987
• Prev. Close: 1.0910
• % chg. over the last day: -0.70%

The ECB, as expected, raised the interest rate by 0.5% yesterday. The US Fed is ending its rate hike cycle and will soon talk about ending quantitative tightening (QT), with the ECB about halfway through and planning to start QT in March. The rate spread between the euro and the dollar will continue to narrow, which is positive for the European currency. Analysts believe that all downward corrections in EUR/USD quotes are worth using for medium-term euro purchases.

Trading recommendations

• Support levels: 1.0879,1.0834,1.0801,1.0781,1.0710,1.0650,1.0597
• Resistance levels: 1.0926,1.0967,1.1017,1.1077

The trend on the EUR/USD currency pair on the hourly time frame is still bullish. The price has been corrected to the buy area. The MACD indicator has become negative, but there are no signs of a reversal yet. Under such market conditions buy trades are better to consider from the support level of 1.0987, but confirmation in the form of a false breakdown is required. Sell deals can be considered from the resistance level of 1.0926 or 1.0967, but it is also better with a confirmation in the form of a reverse initiative.

Alternative scenario:

if the price breaks down through the support level of 1.0834 and fixes below it, the downtrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.2370
• Prev. Close: 1.2224
• % chg. over the last day: -1.19%

As expected, the Bank of England (BoE) raised its interest rate by 50 bps yesterday. 7 of 9 representatives voted for a 0.5% rate hike. The split does not show that the Monetary Policy Committee (MPC) has changed its previous forecast, which was possible because the UK economy is showing signs of weakness. The report indicates that the Bank of England is ready to tighten monetary policy further if price pressures persist. But the implication is that future changes will be smaller. The British pound reacted to the news with a decline, but the fundamental picture is now on the side of the sterling strengthening against the dollar because of the narrowing interest rate differential.

Trading recommendations

• Support levels: 1.2343,1.2311,1.2263,1.2220,1.2080,1.2000,1.1928
• Resistance levels: 1.2416,1.2446,1.2519

From the technical point of view, the trend on the GBP/USD currency pair on the hourly time frame is bullish. The price dropped sharply on the news yesterday and approached the priority change level. The MACD indicator is in the negative zone with no signs of a reversal. Under such market conditions, it is better to look for buy trades on intraday time frames from the support level of 1.2200, but with confirmation in the form of initiative on the lower time frames. Sell trades are best sought from the resistance level of 1.2263 or 1.2311, but also better with confirmation in the form of reverse initiative.

Alternative scenario:

if the price breaks down through the 1.2200 support level and fixes above it, the downtrend will likely resume.

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 128.90
• Prev. Close: 128.67
• % chg. over the last day: -0.18%

As the Bank of Japan holds 10-year government bond yields at 0.5%, the declining US equivalent continues to narrow the rate differential, suggesting a continued medium-term bearish trend in the USD/JPY pair. It also suggests that Japan’s Central Bank is unlikely to tighten monetary policy until deflation is defeated and the Ministry of Finance stops relying on ultra-low yields to control the cost of government debt. And the situation is unlikely to change before the change of the Governor of the Bank of Japan in April.

Trading recommendations

• Support levels: 128.16,127.53,126.19
• Resistance levels: 129.04,130.58,131.10,130.61,131.58,132.37,132.95,133.23

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bearish. The price is trading below the moving averages and starting to form a balance. The MACD indicator is in the negative zone, but there is a divergence, which indicates a weakness in sales. Buy trades are best sought from the level of 128.16, but only with confirmation on the lower time frames, as the level has already been tested. Sell deals can be sought from the resistance level of 129.05, provided that there is a reverse reaction.

Alternative scenario:

If the price fixes above the resistance level of 130.58, the uptrend will be renewed with a high probability.

The USD/CAD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.3287
• Prev. Close: 1.3315
• % chg. over the last day: +0.21%

The Canadian dollar is a commodity currency and depends on instruments such as the dollar index and oil. A ban on Russian oil will go into effect on Feb. 5, which could hit global supplies. At the current level of production, analysts forecast an increase in oil prices. In turn, rising oil prices will strengthen the Canadian dollar. However, it should be noted that the excessive growth in prices for energy may trigger a new round of inflationary pressure, which is now diligently fought by the world’s central banks.

Trading recommendations

• Support levels: 1.3281,1.3212
• Resistance levels: 1.3331,1.3379,1.3428,1.3445,1.3496,1.3520,1.3554,1.3595

From the point of view of technical analysis, the trend on the USD/CAD currency pair is bearish. The price is trading at the level of moving averages. The MACD indicator has become positive. Within the day, there is a slight buying pressure. Under such market conditions, buy trades can be considered from the support of 1.3281, but with additional confirmation in the form of an impulse initiative on the lower time frames. Sell deals should be considered from the resistance level of 1.3331 or 1.3379, provided there is a reversal.

Alternative scenario:

if the price breaks out and consolidates above the resistance level of 1.3428, the uptrend will likely resume.