The Analytical Overview of the Main Currency Pairs on 2023.04.03

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0904
• Prev. Close: 1.0841
• % chg. over the last day: -0.58%

For the last month, the inflation rate in the Eurozone declined from 8.5% to 6.9% on an annualized basis. But the core inflation (excluding food and energy prices) remains steady. Last month’s increase was 0.1%, annualized at 5.6% to 5.7%, which is a new record. After the published data, ECB head Christine Lagarde pointed out that core inflation remains too high, but the economy is resilient, the financial system is strong, and the recent banking stress will not hinder the fight against inflation. Thus, analysts are betting on another 0.5% rate hike at the May meeting of Europe’s Central Bank.

Trading recommendations

• Support levels: 1.0770,1.0680,1.0519,1.0482
• Resistance levels: 1.0839,1.0924,1.1017

The trend on the EUR/USD currency pair on the hourly time frame is bullish. At the moment, the price is correcting and trading below the moving averages. The MACD indicator is in the negative zone, with no signs of divergence. Buy trades are best considered from the support level of 1.0770, but only with confirmation. It is worth buying after confirmation on the intraday time frames in the form of a structure change. Sell positions can be considered from the resistance level of 1.0839, subject to a reversal.

Alternative scenario:

if the price breaks down through the support level of 1.0711 and fixes below it, the downtrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.2380
• Prev. Close: 1.2329
• % chg. over the last day: -0.41%

The British GDP grew by 0.1% in the last quarter. Thus, the UK managed to avoid a technical recession. According to the latest Bank of England monetary policy report, inflation is expected to fall significantly in the second quarter of 2023 due to the extension of the energy price guarantee (EPG) announced in the new budget and falling wholesale energy prices. The Bank of England may not need to raise rates aggressively in the coming months. The next Bank of England meeting is in mid-May, giving Governor Bailey plenty of time to process a range of fresh data on inflation, GDP, and employment. Recent data on the likelihood of a rate hike by the Bank of England shows that one 25 basis point rate hike is expected in the second quarter before the Central Bank hits the pause button.

Trading recommendations

• Support levels: 1.2266,1.2178,1.2112,1.2009,1.1963,1.1929,1.1843
• Resistance levels: 1.2343,1.2415,1.2519

From the technical point of view, the trend on the GBP/USD currency pair on the hourly time frame is bullish. But now the price is correcting. The MACD indicator has become negative, and there is weak seller’s pressure inside the day. Under such market conditions, it is best to consider buying after a pullback to the nearest support level of 1.2266 but with confirmation in the form of a reverse reaction. Sell trades are best to look for on intraday time frames from the resistance level of 1.2343, with confirmation in the form of a false breakout.

Alternative scenario:

if the price breaks down through the 1.2178 support level and fixes below it, the downtrend will likely resume.

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 132.68
• Prev. Close: 132.76
• % chg. over the last day: +0.06%

A senior International Monetary Fund official said Friday the Bank of Japan should consider more flexible changes to long-term interest rates even as it maintains an ultra-soft monetary policy. The IMF sees bilateral risks to Japan’s inflation outlook: “upside surprises” stem from larger-than-expected wage hikes resulting from companies’ spring talks with labor unions. Japan’s central bank may ease the burden on financial institutions by allowing the longer end of the curve (YCC) to move more in line with its policy of controlling bond yields. Markets are full of rumors that the Bank of Japan may modify or abandon the YCC to mitigate the side effects of this approach when new Governor Kazuo Ueda and his team fully assume office.

Trading recommendations

• Support levels: 132.47,131.90,130.91,127.80
• Resistance levels: 133.84,135.11,136.07,137.91

From the technical point of view, the medium-term trend on the currency pair USD/JPY has changed to bullish. At the moment, the price is trading above the moving averages, and there is buying pressure. But the MACD indicator is overbought, and there is a divergence. It is better to look for buy trades from the support level of 132.47 or 131.90, but only with confirmation on the lower time frames. Sell deals can be sought from the resistance level of 133.84, but also with additional confirmation in the change of structure on the intraday time frames.

Alternative scenario:

if the price fixes below the 130.91 support level, the downtrend will be resumed with a high probability.

The USD/CAD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.3521
• Prev. Close: 1.3515
• % chg. over the last day: -0.04%

The Canadian economy is recovering. The latest GDP data showed that the economy added 0.5% for the month of March (expectation of 0.4%). Overall, the economy for the fourth and first quarters is ahead of the Bank of Canada’s forecasts and continues to show resilience. The Bank of Canada’s GDP forecasts for the two quarters are trending upward. Markets are estimating a quarter-point cut in the Bank of Canada’s rate by September or October this year. At the same time, Saudi Arabia and OPEC+ producers on Sunday announced voluntary cuts in oil production. This is positive for the Canadian dollar because, as a commodity currency, production cuts tend to drive up oil prices.

Trading recommendations

• Support levels: 1.3515
• Resistance levels: 1.3568,1.3616,1.3644,1.3694,1.3722,1.3786,1.3814,1.3862

From the point of view of technical analysis, the trend on the USD/CAD currency pair is bearish. The price is trading below the moving averages. But the MACD indicator is oversold, and there are signs of divergence, which suggests that an upward correction should be expected in the near future. Under such market conditions, it is better to buy from the support level of 1.3515 but with a confirmation in the form of a change in the structure on the lower time frames. Sell positions can be sought from the resistance level of 1.3568, but only with confirmation in the form of a reverse initiative.

Alternative scenario:

if the price breaks out and consolidates above the resistance level of 1.3694, the uptrend will likely resume.