The Analytical Overview of the Main Currency Pairs on 2023.07.03

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0860
• Prev. Close: 1.0909
• % chg. over the last day: +0.45%

The Eurozone inflation rate declined from 6.1% to 5.5% y/y (5.6% expected). Core inflation (which excludes food and energy prices) rose to 5.4% y/y from 5.3% (5.5% expected). A more detailed report showed that services inflation hit a new high. Core inflation is likely to continue falling as many price pressure indicators continue to decline from their peaks. But the ECB first needs to see a decline in services and food prices to think about ending the tightening cycle.

Trading recommendations

• Support levels: 1.0858,1.0785,1.0719,1.0688,1.0659,1.0634
• Resistance levels: 1.0922,1.0976,1.0995,1.1185

The trend on the EUR/USD currency pair on the hourly time frame is bullish. The price failed to close below the priority change level of 1.0845. Buyers demonstrated strength. The MACD indicator became positive. Under such market conditions, buy trades can be considered from the support level of 1.0858 but with additional confirmation on the lower time frames. Sell deals can be considered from the resistance level of 1.0922 or 1.0976, but with confirmation in the form of a false breakout since the levels have already been tested.

Alternative scenario:

if the price breaks through the support level of 1.0845 and fixes below it, the downtrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.2611
• Prev. Close: 1.27471.2694
• % chg. over the last day: +0.65%

The British pound rose in the second quarter on expectations that the Bank of England will raise interest rates in an attempt to curb stubbornly high inflation. But according to the UK Central Bank’s latest guidance, inflation will begin to decline, potentially sharply, in the second quarter, and rate hikes could be subdued in the second half of the year. Price pressures are expected to ease considerably due to expectations of falling energy prices and the extension of the energy price guarantee (EPG). But food prices remain high, and the UK labor market remains resilient. Analysts believe that since core inflation remains stubbornly high, the Bank of England will have to keep raising rates until this begins to be reflected in lower food and service prices.

Trading recommendations

• Support levels: 1.2647,1.2583,1.2539,1.2486,1.2421,1.2391,1.2349
• Resistance levels: 1.2716,1.2757,1.2836

From the technical point of view, the trend on the GBP/USD currency pair on the hourly time frame is bullish. The price returned to growth without reaching the priority change level. The MACD indicator returned to positive territory. The most optimal level to buy is 1.2647 or 1.2583 but with confirmation. It is better to consider sell deals from the resistance level of 1.2716 or 1.2757, but also with a confirmation on the lower time frames in the form of a false breakout as the level has already been tested.

Alternative scenario:

if the price breaks through the support level 1.2583 and fixes below it, the downtrend will most likely resume.

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 144.73
• Prev. Close: 144.28
• % chg. over the last day: -0.31%

The Japanese yen fell against the dollar to its lowest level since last November after the leaders of the US Federal Reserve and the Bank of Japan reiterated last week their monetary policy stance. Fed Chairman Jerome Powell was hawkish and spoke of two more rate hikes this year. At the same time, Bank of Japan Governor Kazuo Ueda made it clear that his bank would maintain its ultra-soft settings in the near future. Thus, monetary policy divergence is pushing USD/JPY quotes higher. But Japan’s Finance Minister Shunichi Suzuki warned that the government would react to excessive yen weakness. Analysts believe that a drop in the yen above $145 per dollar could trigger an intervention.

Trading recommendations

• Support levels: 144.30,143.66,143.27,142.37,141.60,141.23,140.16,139.85,
• Resistance levels: 145.00

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bullish. The price has reached an important psychological resistance level of 145, where buyers started to partially fix their positions. The MACD indicator has become negative, and the price has become flat. The most appropriate level to buy would be 144.28 or 143.66 in case of a deeper correction. Sell trades can be considered from the resistance level of 145.00 but with confirmation in the form of a false breakdown and a change in the structure on the lower time frames.

Alternative scenario:

if the price fixes below the 143.27 support level, with a high probability the downtrend will resume.

The USD/CAD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.3242
• Prev. Close: 1.3244
• % chg. over the last day: +0.02%

The results of the Business Outlook Survey for the second quarter of 2023 show that Canadian companies still expect weak sales growth in the future. Nevertheless, businesses reported that their domestic demand numbers were up from a year ago as uncertainty about future interest rates and recession fears faded. Most companies expect long-term inflation to be within the Bank of Canada’s inflation-control target range. But more companies believe it will take five years or more for inflation to return to 2%. They believe inflation is constrained by high government spending and strong demand.

Trading recommendations

• Support levels: 1.3184,1.3145,1.3116
• Resistance levels: 1.3258,1.3293,1.3317,1.3357,1.3384,1.3461,1.3503

From the point of view of technical analysis, the trend on the USD/CAD currency pair is bullish. The price is trading at the level of moving averages. The MACD indicator has become inactive, and the pressure of buyers remains, but a slight correction is possible. It is best to look for buy deals from the 1.3184 support level but with confirmation on the lower time frames in the form of buyers’ reactions to the level. It is better to look for sell deals from the resistance level of 1.3258 but with confirmation in the form of reverse initiative and short targets.

Alternative scenario:

if the price breaks through and consolidates below the support level of 1.3116, the downtrend will resume with a high probability.