The Analytical Overview of the Main Currency Pairs on 2023.03.03

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0667
• Prev. Close: 1.0596
• % chg. over the last day: -0.67%

The latest data showed that inflationary pressures remain in the Eurozone. Although the annualized consumer price index fell from 8.6% to 8.5%, core inflation (excluding food and energy prices) unexpectedly rose from 5.3% to 5.6%. Meanwhile, the unemployment rate rose from 6.6% to 6.7%. Such data support the idea that without lower energy prices, inflation remains tight, which will reinforce the hawkish rhetoric of ECB policymakers. Core inflation data is likely to drive ECB decisions, with ECB head Christine Lagarde saying that the need for higher rates remains.

Trading recommendations

• Support levels: 1.0582,1.0544
• Resistance levels: 1.0614,1.0656,1.0704,1.0804,1.0906,1.0926,1.0967

The trend on the EUR/USD currency pair on the hourly time frame is bearish. The price has fallen below the moving averages again. The MACD indicator has become negative, and sellers’ pressure prevails within the day. Under such market conditions, buy trades are best considered after an impulse breakdown of the resistance level 1.0614. Selling can be considered from the resistance level of 1.0656, subject to confirmation in the form of a reversal in the intraday time frames.

Alternative scenario:

if the price breaks down through the resistance level of 1.0704 and fixes above it, the uptrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.2025
• Prev. Close: 1.1947
• % chg. over the last day: -0.65%

British Prime Minister Rishi Sunak reached an agreement with the European Union on the status of Northern Ireland, which is expected to open up more trade after Brexit between the EU and the United Kingdom. The Brexit deal may lead to some short-term strengthening of the pound. Still, the medium-term picture for the British currency remains bleak amid a lot of problems in the economy with continued inflationary pressures.

Trading recommendations

• Support levels: 1.1954,1.1929,1.1875
• Resistance levels: 1.1988,1.2051,1.2087,1.2147,1.2200,1.2267,1.2311,1.2416

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 below the moving averages. The MACD indicator has become negative. Under such market conditions, it is better to look for sell deals from the resistance level of 1.1988 or 1.2051 but with a confirmation in the form of a false breakout. Buy trades are best sought from the support level of 1.1954 but better with confirmation on intraday time frames.

Alternative scenario:

if the price breaks out through the 1.2147 resistance level and fixes above it, the uptrend will likely resume.

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 136.15
• Prev. Close: 136.74
• % chg. over the last day: +0.43%

The Japanese yen has remained stable this week. The Bank of Japan holds the interest rate at 0.10% and maintains control of the yield curve (YCC), targeting a range of +/- 0.50% near zero for Japanese ten years government bonds (JGBs). But yields often reach the upper range, causing the central bank to constantly have to step in and spend money. Analysts speculate that the YCC threshold may be adjusted in the second or third quarter of this year. But for now, the new governor of the Bank of Japan (BoJ), Kazuo Ueda, plans to temporarily maintain an ultra-soft monetary policy.

Trading recommendations

• Support levels: 136.55,135.94,135.04,134.04,133.47,132.95,131.43,129.68
• Resistance levels: 137.48

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bullish. The price managed to consolidate above the level of 136.55, canceling the false breakout area. The MACD indicator is in the positive zone, but signs of divergence are still observed in several time frames. Under such market conditions, buy trades are best sought from the support level of 136.55, but only with intraday confirmation. Sell deals can be sought from the 137.48 resistance level, but with additional confirmation in the form of a reverse initiative on the lower time frames.

Alternative scenario:

if the price fixes below the 135.04 support level, the downtrend will be resumed with a high probability.

The USD/CAD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.3590
• Prev. Close: 1.3595
• % chg. over the last day: +0.04%

Oil prices continued to rise on Thursday, helped by signs of a strong recovery in China, the largest importer of crude oil, and easing fears of aggressive rate hikes in the US. The Canadian dollar is a commodity currency, so it is highly correlated with the oil market. Given that the Bank of Canada has probably already completed its tightening cycle, while the US Fed is likely to peak rates by mid-summer, the increasing interest rate differential is not in favor of the Canadian dollar. However, strengthening oil prices may revive investor interest in the Canadian currency.

Trading recommendations

• Support levels: 1.3582,1.3513,1.3471,1.3441,1.3390,1.3347,1.3295,1.3212
• Resistance levels: 1.3664,1.3700

From the point of view of technical analysis, the trend on the USD/CAD currency pair is bullish. The price is trading at the level of the moving averages and forming a wide-volatile corridor, which makes it difficult to find good entry points. The MACD indicator has become negative, and there is seller pressure inside the day. In such market conditions, buy trades are worth looking for from the support level of 1.3582, but only with a confirmation in the form of a false breakdown and a reverse reaction. Sell trades can be searched from the resistance level of 1.3664 or 1.3700, but only with a confirmation of a false breakout and short targets. The false break is very important in a reversal because there is a liquidity grab above /below the level.

Alternative scenario:

if the price breaks down and consolidates below the support level of 1.3513, the downtrend will likely resume.