The Analytical Overview of the Main Currency Pairs on 2023.02.23

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0639
• Prev. Close: 1.0604
• % chg. over the last day: -0.33%

The US dollar was again a growth driver yesterday. The January FOMC minutes did not contain any new hawkish statements. Still, they reinforced recent projections by FOMC officials that there is more work to be done to tighten monetary policy to get inflation back to the 2% target. According to the final minutes of the meeting, most FOMC participants supported a reduction in the pace of interest rate hikes, although some officials advocated more aggressive moves. Inflation risks are still skewed upward, and restoring price stability will take some time. Immediately after the release of the minutes, bond yields rose sharply, raising the US dollar.

Trading recommendations

• Support levels: 1.0616,1.0597,1.0544
• Resistance levels: 1.0704,1.0804,1.0906,1.0926,1.0967,1.1017,1.1077

The trend on the EUR/USD currency pair on the hourly time frame is bearish. The situation has not changed dramatically compared to yesterday, with the exception that the price updated the weekly low. The MACD is in the negative zone, but the divergence is still present in many time frames. In the coming days, traders should expect a corrective move-up. Under such market conditions, buy trades are best considered from the support level of 1.0616 or 1.0597, subject to confirmation on intraday time frames. Sell deals can be considered from the resistance level of 1.0704, but better with confirmation in the form of a reverse initiative on the lower time frames or a false breakout.

Alternative scenario:

if the price breaks down through the resistance level of 1.0722 and fixes above it, the uptrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.2108
• Prev. Close: 1.2045
• % chg. over the last day: -0.52%

The pound is now looking more confident than the euro. The latest data showed that the Bank of England has more room to maneuver in terms of raising the interest rate. According to the Bank of England, inflation is expected to fall quickly in the coming months as energy prices and the cost of imported goods fall, while the British consumer has less disposable income to spend on goods and services. The UK Central Bank expects to raise rates by 25 basis points at its March meeting and another 25 basis points in the second quarter. If inflation follows the Bank of England’s expectations, it could be a reason to cut rates in the fourth quarter.

Trading recommendations

• Support levels: 1.2040,1.2013,1.1964,1.1930
• Resistance levels: 1.2148,1.2200,1.2267,1.2311,1.2416

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. The MACD indicator is in the negative zone, but there are signs of sellers’ weakness. Under such market conditions, it is better to look for buy trades on intraday time frames from the support level of 1.2040 or 1.2013, but with confirmation. It is better to look for sell trades from the resistance level of 1.2148, but it is also better with a confirmation in the form of a false breakout.

Alternative scenario:

if the price breaks out through the 1.2200 resistance level and fixes above it, the uptrend will likely resume.

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 134.98
• Prev. Close: 134.90
• % chg. over the last day: -0.05%

Yesterday, the Bank of Japan (BoJ) was forced to buy 10-year government bonds again because the yield exceeded the upper limit of 0.5%. This is the second trading session in a row, again raising doubts about the BoJ’s ultra-soft stance. Bank of Japan spokesman Tamura made mixed messages yesterday that soft monetary policy is currently needed, but future policy changes will be vital, citing wage increases as the main factor affecting the services sector. This could give a hawkish bias to the Bank of Japan’s upcoming meeting.

Trading recommendations

• Support levels: 134.11,133.47,132.95,131.43,129.68,129.98,129.19
• Resistance levels: 135.22,135.88

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bullish. At the moment, the price is trading in a narrow corridor on the level of moving averages. The MACD indicator has become inactive, but signs of divergence are still observed in several time frames. Buying pressure is present, but the higher it is, the harder it is for the price to grow. It is better to look for buy trades from the support level of 134.11 or 133.47, but only with confirmation on the lower time frames. Sell deals can be searched for from 135.22, but with an additional confirmation in the form of a false breakout.

Alternative scenario:

if the price fixes below the 132.95 support level, the downtrend will be resumed with a high probability.

The USD/CAD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.3535
• Prev. Close: 1.3550
• % chg. over the last day: +0.11%

Oil prices continued to fall yesterday, leading to weakness in the Canadian currency. Markets are worried that a rate hike will affect economic growth later this year, which in turn will reduce demand for oil. But yesterday, it was reported that Moscow plans to cut oil exports from its Western ports by 25% in March compared to the previous month to boost oil prices. The move is expected to result in a deeper supply cut than 500,000 barrels. Today, traders should keep an eye on crude oil reserve data. At the moment, rising US inventories combined with the planned sale of 26 million barrels from the US Strategic Petroleum Reserve point to a potential oversupply that is expected to limit any upside potential for crude oil prices.

Trading recommendations

• Support levels: 1.3469,1.3441,1.3390,1.3347,1.3295,1.3212
• Resistance levels: 1.3538,1.3595

From the point of view of technical analysis, the trend on the USD/CAD currency pair is bullish. But the price has consolidated below the level of 1.3583, which may lead to a corrective movement. The MACD indicator has become inactive, and there are signs of divergence. Buy trades can be considered from the support level of 1.3469, but with additional confirmation on the lower time frames. Sell deals can be searched from the resistance level of 1.3538 but with short targets.

Alternative scenario:

if the price breaks down and consolidates below the support level of 1.3390, the downtrend will likely resume.