The Analytical Overview of the Main Currency Pairs on 2023.05.19

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0836
• Prev. Close: 1.0769
• % chg. over the last day: -0.62%

In the US, initial jobless claims of 242,000 were below expectations and lower than the previous week, a sign of resilience in the labor market. Existing home sales fell by 3.4% in April from the previous month, much more than expected. About 66% of futures traders expect the Federal Reserve to pause interest rate hikes at its June meeting. However, not everyone agrees with the pause. Dallas Federal Reserve President Laurie Logan said Thursday that current economic data do not justify a pause. Another important factor is the debt ceiling, which Congress must raise in the next couple of weeks if the US is to avoid the possibility of default. Although lawmakers and President Joe Biden have said that the US will not default, the issue is still being negotiated.

Trading recommendations

• Support levels: 1.0768,1.0711
• Resistance levels: 1.0816,1.0875,1.0904,1.0956,1.0995,1.1056,1.1075

The trend on the EUR/USD currency pair on the hourly time frame is bearish. The price continues to decline, breaking through all support levels. The MACD indicator is in the negative zone, but it has already indicated a divergence on several time frames. Under such market conditions, buy trades can be better considered from the support level of 1.0768 or 1.0711, but only with confirmation in the form of buyers’ initiative and structure change on the lower time frames. Sell deals can be considered from the resistance level of 1.0816 but with confirmation in the form of sellers’ reaction.

Alternative scenario:

if the price breaks through the resistance level of 1.0904 and fixes above it, the uptrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.2483
• Prev. Close: 1.2407
• % chg. over the last day: -0.62%

UK consumer confidence rose for the fourth straight month to its highest level in 15 months as households became more positive about the economy and their finances, even as inflation remained in the double digits. The GfK Confidence Index rose to minus 27 in annual terms in May from minus 30 in April, moving away from a record low of minus 49 last September, when former Prime Minister Liz Truss’s “mini-budget” caused chaos in the financial markets. The overall trajectory of the economy this year is positive and may reflect a stronger underlying financial picture in the UK than many think.

Trading recommendations

• Support levels: 1.2385,1.2343,1.2320
• Resistance levels: 1.2480,1.2546,1.2569,1.2612

From the technical point of view, the trend on the GBP/USD currency pair on the hourly time frame is bearish. The British pound continues to lose ground due to the rise in the dollar index. The MACD indicator is in the negative zone, but there is a divergence at several time frames. The best support level for buy deals is 1.2385, but only with a confirmation in the form of a bullish initiative and a change of the structure on the lower time frames. Sell trades are best sought from the resistance level of 1.2480 or from the moving averages but with confirmation on the intraday time frames.

Alternative scenario:

if the price breaks down through the 1.2546 resistance level and fixes above it, the uptrend will likely resume.

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 137.62
• Prev. Close: 138.70
• % chg. over the last day: +0.78%

Japan’s nationwide core CPI rose from 3.1% to 3.4% year-over-year, returning to 40-year highs after declining in Q1 and foreshadowing increased pressure on the Bank of Japan to tighten policy this year finally. Japan’s dependence on imports, from fuel to basic food ingredients, has been the biggest driver of inflation amid widespread disruptions in global supply chains caused by Russia’s invasion of Ukraine. Weakness in the Japanese yen, caused by a widening interest rate differential between the BoJ and the US Federal Reserve, has also impacted more expensive exports.

Trading recommendations

• Support levels: 137.91,135.64,135.66,135.15,134.67,133.50,133.03,132.70
• Resistance levels: 138.88,140.53

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bullish. The price is steadily growing, breaking through the resistance levels on its way. The MACD indicator is in the positive zone, but there are the first signs of divergence. Under such market conditions, it is best to buy from the support level of 137.91 or from the moving averages but with confirmation on the lower time frames. Sell trades can be considered from the resistance level of 138.88, but first, the price must show the sellers’ initiative.

Alternative scenario:

if the price fixes below the 135.66 support level, with a high probability the downtrend will resume.

The USD/CAD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.3452
• Prev. Close: 1.3500
• % chg. over the last day: +0.35%

Bank of Canada Governor Tiff Macklem said yesterday that April’s rise in inflation – the first in 10 months – was an anomaly and added that consumer prices would continue to decline. Prior to Macklem’s speech, financial markets saw an 80% chance of a rate hike in July. After the BoC chief’s speech, the probability dropped to 60%. Macklem also indicated that the Bank of Canada is more worried about the ability of households to repay their debts and is seeing signs of financial stress in home buyers.

Trading recommendations

• Support levels: 1.3436,1.3397,1.3267
• Resistance levels: 1.3535,1.3589,1.3589,1.3647,1.3667,1.3695

From the point of view of technical analysis, the trend on the USD/CAD currency pair in the medium term is still bearish. But at the moment, the price is forming a wide-volatile corridor with signs of bullish pressure. The MACD indicator is in the positive zone. The flat structure makes it difficult to find good entry points. Under such market conditions, buy trades are best sought from the support level of 1.3436, but with confirmation in the form of a false breakdown and buyers’ reaction to the level. Sell positions are best sought from the resistance level of 1.3535 but also with confirmation in the form of a sellers’ initiative.

Alternative scenario:

by JustMarkets, 2023.05.19