The Analytical Overview of the Main Currency Pairs on 2023.05.25

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0767
• Prev. Close: 1.0748
• % chg. over the last day: -0.18%

The FOMC protocol showed that the officials are divided in their support for further rate hikes. The door to further rate hikes remains open, and the decision will depend on new data coming in. The CME FedWatch Tool shows a 68.7% probability that the Central Bank will pause its aggressive rate hike campaign at the June 13-14 meeting. Before the release of the FOMC minutes, the probability was around 80%. The increase in the probability of a rate hike strengthens the dollar index.

Trading recommendations

• Support levels: 1.0711
• Resistance levels: 1.0799,1.0836,1.0875,1.0904,1.0956,1.0995,1.1056,1.1075

The trend on the EUR/USD currency pair on the hourly time frame is bearish. The price is forming a flat structure with elements of bearish pressure. The MACD indicator is in the negative zone, but the divergence has been formed at several time frames, which indicates a limited downside potential. Under such market conditions, buy trades can be better considered from the support level of 1.0711, but only with a confirmation in the form of a false breakdown and a change of the structure on the lower time frames. Sell deals can be considered from the resistance level of 1.0799 but with confirmation in the form of a seller’s reaction.

Alternative scenario:

if the price breaks through the resistance level of 1.0835 and fixes above it, the uptrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.2407
• Prev. Close: 1.2363
• % chg. over the last day: -0.36%

The UK Consumer Price Index declined from 10.1% to 8.7% (forecast 8.2%) on an annualized basis. But core inflation (excluding food and energy prices) unexpectedly rose from 6.2% to 6.8% y/y. Service inflation also jumped from 6.6% to 6.9% y/y. This is a new record. Such data will undoubtedly put pressure on the Bank of England to raise rates by at least another 25 basis points in June. But Bank of England Governor Andrew Bailey still believes that consumer inflation will fall to the 2% target as soon as this year.

Trading recommendations

• Support levels: 1.2343,1.2322
• Resistance levels: 1.2415,1.2480,1.2546,1.2569,1.2612

From the technical point of view, the trend on the GBP/USD currency pair on the hourly time frame is bearish. The price has reached the daily support level. The MACD indicator shows divergence on several time frames. The most optimal level to buy is 1.2343 or 1.2322 but with confirmation in the form of a change in the structure on the lower time frames. It is better to look for sell deals from the resistance level of 1.2415 but with a confirmation in the form of a false breakout.

Alternative scenario:

if the price breaks down through the 1.2480 resistance level and fixes above it, the uptrend will likely resume.

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 138.56
• Prev. Close: 139.50
• % chg. over the last day: +0.68%

Negotiations to raise the US debt limit are at a standstill, causing markets to become more and more hysterical. The dollar index is rising amid a growing likelihood of a US default, which could come as soon as June 1 if politicians are unable to reach an agreement. The rising probability of another rate hike at the June FOMC meeting also contributes to the strength of the dollar. Considering that the Japanese currency currently has no fundamental factors for strengthening, USD/JPY quotes continue their upward movement.

Trading recommendations

• Support levels: 138.86,138.00,137.54,136.52,135.66,135.15,134.67
• Resistance levels: 140.53

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bullish. The price continues to grow steadily, breaking through all the resistance levels. The MACD indicator is in the positive zone but with signs of divergence. The support level of 138.86 can be used to join the bullish trend, but the targets should not be far, as the growth potential is limited. But it is better to look for buying from the support level of 136.54. Sell trades can be considered from the resistance level of 140.53 but with confirmation in the form of a false breakout and a change in the structure on the lower time frames.

Alternative scenario:

if the price fixes below the 137.55 support level, with a high probability the downtrend will resume.

The USD/CAD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.3501
• Prev. Close: 1.3593
• % chg. over the last day: +0.68%

Oil hit a three-week high on Wednesday after US government data showed the most significant weekly drop in crude oil in six months. Demand for oil is rising in anticipation of summer road, air, and sea shipments. Rising oil tends to have a positive effect on the commodity currency CAD. But yesterday, the USD/CAD quotes continued to rise as the risks of the US default outweighed the increase in demand for oil. There are only seven calendar days left till June 1st, while it takes about three days to go through all the procedures if there is a deal. Therefore, US politicians have four days left to find common ground.

Trading recommendations

• Support levels: 1.3523,1.3484,1.3468,1.3436,1.3397,1.3267
• Resistance levels: 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. The five-day accumulation of liquidity in the flat corridor was distributed in a bullish trend. The MACD indicator has become positive, with no signs of reversal. Under such market conditions, buy trades are best sought from the support level of 1.3523 or from the moving average lines, but with confirmation in the form of buyers’ initiative on the lower time frames. Sell positions are best considered from the resistance level of 1.3647, but only with a confirmation in the form of a false breakout.

Alternative scenario:

by JustMarkets, 2023.05.25