The Analytical Overview of the Main Currency Pairs on 2023.03.07

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0622
• Prev. Close: 1.0682
• % chg. over the last day: +0.56%

Austrian Central Bank Governor Robert Holzmann, perhaps the most hawkish politician, shook up the Eurobond markets yesterday by suggesting that a 0.5% ECB rate hike next week would be just the first of four 50 basis point steps. This followed remarks by Belgian counterpart Pierre Wunsch on Friday that investors are betting on an ECB rate peak of 4%, which is still 150 basis points or 1.5% away. This hawkish bias by the ECB could help strengthen the European currency in the medium term, as the interest rate differential between the ECB and the US Federal Reserve will decrease.

Trading recommendations

• Support levels: 1.0641,1.0610,1.0582,1.0544
• Resistance levels: 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 but close to change. The price is trading above the moving averages. The MACD indicator has become positive, and buyers prevail intraday, but there are also signs of divergence. Under such market conditions, traders should expect a slight pullback. Buy trades are best to consider from the support level of 1.0641 or 1.0610, but with confirmation within the day. Sell deals can be considered from the resistance level of 1.0703 on the condition of a false breakout and impulse return under the level.

Alternative scenario:

if the price breaks down through the resistance level of 1.0703 and fixes above it, the uptrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.2023
• Prev. Close: 1.2025
• % chg. over the last day: +0.02%

February’s data showed a steady increase in overall construction sector activity in the UK, ending a two-month period of decline. The rate of growth was the fastest since May 2022. Commercial construction performed best in February with an index of 55.3, the fastest pace of growth in nine months. Civil construction activity also returned to growth in February (index of 52.3), although the growth rate was very modest. But survey respondents noted subdued market conditions due to higher interest rates, along with a decline in new home construction projects in anticipation of weaker demand.

Trading recommendations

• Support levels: 1.1991,1.1954,1.1929,1.1875
• Resistance levels: 1.2051,1.2086,1.2147,1.2200,1.2267,1.2311,1.2416

From the technical point of view, the trend on the GBP/USD currency pair on the hourly time frame is bearish. The price is trading in a range, with liquidity narrowing in the form of a triangle. As a rule, such a formation occurs before an impulse movement. The MACD indicator has become positive, but activity has declined sharply. Under such market conditions, it is better to look for sell deals from the resistance level of 1.2051 or 1.2086 but with a confirmation in the form of a false breakout. Buy trades are better to look for from the support level of 1.1991 or 1.1954, but better with confirmation on intraday timeframes.

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: 135.93
• Prev. Close: 135.91
• % chg. over the last day: -0.01%

Today and tomorrow, Federal Reserve Bank Chairman Jerome Powell will testify before Congress, where he will present a semi-annual monetary policy report. Any hint by Powell that the US Fed is abandoning its hawkish stance could lead to further declines in Treasury yields, which would cause the dollar index to fall and the USD/JPY to decline. Conversely, if the Fed maintains its hawkish bias, given the Bank of Japan’s soft policy, the situation may remain a growth driver for USD/JPY.

Trading recommendations

• Support levels: 135.59,135.04,134.04,133.47,132.95,131.43,129.68
• Resistance levels: 136.55,137.07,137.48

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bullish. The price forms a narrow flat, pushing the prices towards longs. As a rule, such a formation leads to an impulsive movement along the trend. The MACD indicator has become inactive. Under such market conditions, it is best to look for buy deals from the support level of 135.59, but only with intraday confirmation. Sell deals can be sought from the 136.55 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: 1.3599
• Prev. Close: 1.3612
• % chg. over the last day: +0.10%

The CEO of trading company Gunvor said yesterday that oil prices might rise in the second half of the year as Chinese demand returns to the market, adding that the oil market has stabilized. Oil has also received support from Saudi Arabia, the largest crude exporter, which has raised oil prices for Asia. A weaker dollar makes dollar-denominated oil cheaper for foreign buyers and boosts demand. The Canadian dollar is a commodity currency, so rising oil prices paired with a falling dollar is a strong catalyst for Canadian strength.

Trading recommendations

• Support levels: 1.3602,1.3582,1.3513,1.3471,1.3441,1.3390,1.3347,1.3295,1.3212
• 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 trades at the level of moving averages and forms a wide-volatility corridor, with volatility starting to narrow into a triangle. This formation usually occurs before an impulse movement. The MACD indicator has become inactive, supply and demand are balanced. Under such market conditions, buy trades are worth looking for from the support level of 1.3582 or 1.3602, but only with confirmation in the form of reaction on the lower time frames. Sell positions cells can be searched from the resistance level of 1.3664 or 1.3700, but only with a confirmation in the form of a false breakout and short targets. The false-break is very important in the reversal because there is liquidity grabbing behind the level.

Alternative scenario:

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