The Analytical Overview of the Main Currency Pairs on 2023.05.31

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0706
• Prev. Close: 1.0733
• % chg. over the last day: +0.25%

The pace of bank lending growth in the Eurozone slowed again in April, confirming the need for a cautious interest rate hike in the coming months. Weak growth and rising borrowing costs are already reducing the demand for credit. Corporate credit growth in the currency bloc of 20 countries slowed to 4.6% in April from 5.2% a month earlier, while credit growth to households fell to 2.5% from 2.9%. Analysts believe the weak monetary data for April adds to the sluggish economic outlook for the remainder of 2023 and argues for a less tight stance at upcoming European Central Bank meetings. This is a negative factor for the European currency.

Trading recommendations

• Support levels: 1.0701,1.0674
• Resistance levels: 1.0759,1.0800,1.0836,1.0875,1.0904,1.0956,1.0995.

The trend on the EUR/USD currency pair on the hourly timeframe is bearish. Yesterday the price formed a false-breakdown zone with a bullish reaction. Now this area can serve as a foundation for the formation of long deals. The MACD indicator is in the negative zone. Momentum shows the weakness of the buyers. Divergence is still here. Under such market conditions, buy trades can be better considered from the support level of 1.0701, but only with additional confirmation. Sell deals can be considered from the resistance level of 1.0759 but with confirmation in the form of sellers’ reaction.

Alternative scenario:

if the price breaks through the resistance level of 1.0800 and fixes above it, the uptrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.2348
• Prev. Close: 1.2411
• % chg. over the last day: +0.51%

The British pound is currently reflecting external conditions, as the subject of the debt ceiling in the US remains relevant. Despite some progress towards an agreement, uncertainty has returned to world markets as several Republicans said they would resist the deal. The Bank of England (BoE) is about 100 bps likely to raise interest rates before the end of the year, while the Federal Reserve has been hawkishly re-pricing lately, providing additional support to the US dollar. For the UK, the money markets look somewhat optimistic, which makes the pound prone to strengthen against the US dollar in the medium term.

Trading recommendations

• Support levels: 1.2364,1.2322
• Resistance levels: 1.2468,1.2546,1.2569,1.2612

From the technical point of view, the trend on the GBP/USD currency pair on the hourly time frame is bearish. But yesterday, the price showed a bullish initiative. The MACD indicator became positive. The best level to buy is 1.2364, but with confirmation. For sell deals, it is better to look for from the 1.2468 resistance level but with a confirmation in the form of a false breakout.

Alternative scenario:

if the price breaks down through the 1.2468 resistance level and fixes above it, the uptrend will likely resume.

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 140.40
• Prev. Close: 139.78
• % chg. over the last day: -0.44%

Bank of Japan Governor Kazuo Ueda said on Tuesday that the Central Bank will patiently maintain its ultra-soft monetary policy, as there is still a long way to go to reach the 2% inflation target. This reduces expectations for a policy change in the near term, which is a negative factor for the Japanese yen. The Bank of Japan will review its quarterly growth and inflation forecasts at its July 27-28 policy meeting.

Trading recommendations

• Support levels: 139.50,138.86,138.00,137.54,136.52,135.66,135.15,134.67
• Resistance levels: 140.70,141.07

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bullish. The price is forming a flat corridor on the levels of moving averages. The MACD indicator is in the negative zone, with signs of bearish pressure. The support level of 139.50 can be used to join the bullish trend, subject to a false breakdown and a reverse reaction. Sell trades could be considered from the resistance level of 140.70 or 141.07 but with confirmation in the form of a bearish initiative.

Alternative scenario:

if the price fixes below the 138.00 support level, with a high probability the downtrend will be renewed.

The USD/CAD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.3587
• Prev. Close: 1.3599
• % chg. over the last day: +0.09%

A hawkish reassessment of the likelihood of a Fed interest rate hike in June threatens to keep support for the US dollar. This is a negative sign for the Canadian currency, especially as oil prices continue to decline. Yesterday, oil prices fell more than 4%. Tensions between Saudi Arabia and Russia are rising as Moscow continues to pump huge amounts of cheaper oil into the market, undermining Riyadh’s efforts to maintain energy prices.

Trading recommendations

• Support levels: 1.3611,1.3582,1.3523,1.3484,1.3468,1.3436,1.3397,1.3267
• 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 bullish. The price is trading above the moving averages. The MACD indicator is in the positive zone with signs of buyer pressure. Under such market conditions, it is better to look for buy deals from the support level of 1.3611 but with confirmation in the form of a buyers’ initiative on the lower timeframes. Selling is best sought from the resistance level of 1.3647 or 1.3667, but only with a confirmation in the form of a false breakout because the levels have already been tested.

Alternative scenario:

by JustMarkets, 2023.05.31