The Analytical Overview of the Main Currency Pairs on 2023.05.09

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.1017
• Prev. Close: 1.1003
• % chg. over the last day: -0.13%

European Central Bank Chief Economist Philip Lane said yesterday that inflation in the Eurozone will slow down sharply this year, but the pace of price growth is still high, including for basic goods and services. Lane believes that sharp declines in energy prices and the removal of bottlenecks should accelerate disinflation, while corporate profit margins, a key driver of price growth last year, should also fall. The ECB predicts that inflation will fall below 3% by the fourth quarter of 2023. Some policymakers have doubted this forecast and argue that there is a risk that high inflation could remain sustained longer.

Trading recommendations

• Support levels: 1.0984,1.0966,1.0963,1.0942,1.0895,1.0830,
• Resistance levels: 1.1056,1.1075,1.1094,1.1185

The trend on the EUR/USD currency pair on the hourly time frame is bullish. The price forms a wide-volatile corridor. The sellers dominate inside the day. The MACD indicator is in the negative zone, but the bears’ pressure is weakening. Under such market conditions, buy trades are best considered from the support level of 1.0984 but with confirmation in the form of reverse initiative. Sell deals can be considered from the resistance level of 1.1056, but only with a confirmation in the form of a false breakout.

Alternative scenario:

if the price breaks down through the support level of 1.0966 and fixes below it, the downtrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.2625
• Prev. Close: 1.2618
• % chg. over the last day: -0.05%

With the Bank of England aiming to get inflation back on target and the global banking sector looking much more stable, recent consumer price movements suggest that another 0.25% rate hike this week is almost a done deal. The final BoE interest rate is expected to be 4.85% (the current level is 4.25%) by September 2023. In addition to increasing borrowing costs, the QT program also continues to make policy more restrictive. Thus, the interest rate differential between the BoE and the US Fed will be narrowing for most of the summer, which will strengthen the British pound against the dollar.

Trading recommendations

• Support levels: 1.2597,1.2539,1.2508,1.2421,1.2386,1.2343,1.2320,
• Resistance levels: 1.2643

From the technical point of view, the trend on the GBP/USD currency pair on the hourly time frame is bullish. The price failed to consolidate above the daily resistance level of 1.2643 yesterday. A flat is now likely to start forming ahead of the US inflation data, which will be published tomorrow. The MACD indicator has become negative, and selling dominates within the day. The best levels to buy are 1.2597 or, in case of a stronger decline, 1.2539. Sell trades are best sought on intraday time frames from the resistance level of 1.2643 but with confirmation in the form of a bearish initiative.

Alternative scenario:

if the price breaks down through the 1.2508 support level and fixes below it, the downtrend will likely resume.

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 134.86
• Prev. Close: 135.11
• % chg. over the last day: +0.18%

On Monday, Japan downgraded Covid-19 to the same level as the seasonal flu. Economists believe the decision will boost the economy by as much as 4.2 trillion yen ($31.2 billion) or about 0.75% of gross domestic product (GDP). Analysts cite higher productivity, increased domestic consumption, and the return of foreign tourists as factors that will contribute to additional growth. Amid lingering fears of a global economic slowdown, Japan’s slower recovery and delayed border opening could help protect the country from slowing growth. Japan’s first-quarter GDP data will be released next week.

Trading recommendations

• Support levels: 134.29,133.49,133.03,132.70,132.02,131.82,130.62
• Resistance levels: 136.41,136.85,137.26,137.91

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bearish. At the moment, the price is forming a narrow price corridor of 134.63-135.30. The MACD indicator has become inactive. It is necessary to wait for either a true or a false breakout of one of the flat boundaries to find good entry points. Under such market conditions, it is better to look for buy deals from the support level of 134.29 or, in case of a deeper decline, from the level of 133.48, but with a confirmation in the form of a reverse initiative. Sell trades can be considered at an impulse breakdown of the 134.29 support level.

Alternative scenario:

if the price fixes above the 137.26 resistance level, the uptrend will resume with a high probability.

The USD/CAD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.3383
• Prev. Close: 1.3371
• % chg. over the last day: -0.09%

Oil prices continued to rise on Monday as recession fears continued to fade. Yesterday, Goldman Sachs analysts joined their Barclays colleagues in predicting that the Federal Reserve will cut interest rates significantly this year. At the same time, strategists at Commerzbank note that fears about oil demand are exaggerated and expect prices to rise in the coming weeks. All these factors will contribute to the growth of oil prices. The Canadian dollar is a commodity currency and has a direct correlation to the dynamics of “black gold”.

Trading recommendations

• Support levels: 1.3300,1.3267
• Resistance levels: 1.3398,1.3484,1.3551,1.3589,1.3647,1.3667,1.3695

From the point of view of technical analysis, the trend on the USD/CAD currency pair is a bearish one. The price is trading below the moving averages. The MACD indicator is in the negative zone, but sellers’ pressure is weak. There is a divergence. It is better to look for buy trades from the support level of 1.3300 but with confirmation in the form of reverse initiative. At the moment, there is not. Sell positions are best looking from the resistance level of 1.3398 or from the moving averages but with confirmation in the form of sellers’ initiative.

Alternative scenario:

if the price breaks out and consolidates above the resistance level of 1.3589, the uptrend will likely resume.