The Analytical Overview of the Main Currency Pairs on 2023.07.19

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.1231
• Prev. Close: 1.1227
• % chg. over the last day: -0.04%

With almost 100% probability, the FOMC will resume the policy normalization cycle after a short pause and raise the rate by another 0.25% next week. But this policy adjustment is already fully in prices, so traders should focus primarily on forward guidance. Last month, the US central bank said it was ready to conduct an additional 50 basis points of tightening in the second half of 2023, but a sharp decline in price pressures is likely to change the Fed’s stance to a softer one. If policymakers take a less hawkish stance or make it clear that the policy tightening campaign is over, the US dollar is likely to continue to fall, while the euro will continue to rise.

Trading recommendations

• Support levels: 1.1196,1.1070,1.1001,1.0958,1.0925,1.0866
• Resistance levels: 1.1272,1.1334

The trend on the EUR/USD currency pair on the hourly time frame is bullish. The price reached the resistance level of 1.1272, and there was a reaction from sellers. Now a price corridor is being formed. The MACD indicator has become inactive. There is a high probability of correction, as the divergence is still strong. Under such market conditions, buy trades can be considered after a false breakdown of the 1.1196 support level. Sell deals can be considered from the resistance level of 1.1272 but with confirmation in the form of a change of structure on the lower time frames.

Alternative scenario:

if the price breaks through the support level of 1.0957 and fixes below it, the downtrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.3071
• Prev. Close: 1.27471.3033
• % chg. over the last day: -0.29%

Inflation data will be released in the UK today. Overall inflation is expected to fall from 8.7% to 8.2% y/y, while core inflation (excluding food and energy prices) is expected to remain at 7.1% y/y. It is core inflation that the Bank of England will attach particular importance to. If the Consumer Price Index in the services sector does not show a slowdown, the Bank of England is likely to conduct another aggressive rate hike of 0.5%. This will give the British currency predominantly ahead of the dollar and the euro. But if services inflation shows a slowdown, the Bank of England is likely to stop at the 0.25% hike. In this case, significant changes in the pound rate should not be expected.

Trading recommendations

• Support levels: 1.3002,1.2924,1.2848,1.2797,1.2762,1.2646
• Resistance levels: 1.3072,1.3140,1.3308

From the technical point of view, the trend on the GBP/USD currency pair on the hourly time frame is bullish. The price is correcting to the nearest support levels. The MACD indicator has become negative, and there is a slight sellers’ pressure inside the day. The most optimal level for buying is 1.3004 but with confirmation on the lower time frames. Sell trades are best considered from the resistance level of 1.3072 or after a false breakout of 1.3140.

Alternative scenario:

if the price breaks through the support level 1.2796 and fixes below it, the downtrend will most likely resume.

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 138.72
• Prev. Close: 138.83
• % chg. over the last day: +0.08%

The main focus of the JPY traders is now on the inflation data to be released this Friday, where inflationary pressures are expected to rise. Economists at UBS and BNP Paribas see the July 28 BOJ meeting as the most likely for a policy change, given that at the same meeting, the BOJ will raise its inflation forecast for the current fiscal year from the current 1.8%. 10-year bond yields have risen and are close to the Bank of Japan’s 0.5% ceiling, so rising inflation could be a catalyst for lifting yield curve controls. If this happens, it will be a strong factor for the Japanese yen to strengthen.

Trading recommendations

• Support levels: 138.48,137.93,137.25,136.56
• Resistance levels: 139.36,140.18,142.08,142.99

From the technical point of view, the medium-term trend on the currency pair USD/JPY is in a downtrend. Now the price is forming a price corridor. The MACD indicator has become positive, and there is buying pressure inside the day. The most suitable level for buying will be 138.48 or 137.93 but with confirmation in the form of buyers’ initiative. Sell trades can be considered from the resistance level at 139.36 or 140.18, but also with confirmation on the lower time frames.

Alternative scenario:

if the price fixes above the 142.99 resistance level, with a high probability, the uptrend will resume.

The USD/CAD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.3194
• Prev. Close: 1.3167
• % chg. over the last day: -0.21%

As part of its ongoing fight against persistently high inflation, the Bank of Canada voted to raise the benchmark rate by 25 bps to 5.0%, the highest level in 22 years. In its statement, the Bank of Canada said the economy has been stronger than expected, adding that consumption and the labor market have been resilient. On the inflation outlook, the Bank of Canada acknowledged that price growth had softened, but noted that the improvement in overall momentum was largely due to lower energy prices rather than underlying pressures. As such, the Bank warned that restrictive policies will be in place for longer.

Trading recommendations

• Support levels: 1.3153,1.3143,1.3108
• Resistance levels: 1.3212,1.3242,1.3289,1.3303,1.3329,1.3383,1.3426

From the point of view of technical analysis, the trend on the USD/CAD currency pair is bearish. Now the price is forming a price corridor, and on the lower time frames, there is a change of initiative in the direction of purchases. The MACD indicator is inactive now, but the pressure of buyers inside the day remains. It is better to buy from the 1.3143-1.3153 area but with confirmation on the lower time frames. Sell trades are best sought from the resistance levels of 1.3212 or 1.3242 but with confirmation in the form of sellers’ initiative.

Alternative scenario:

if the price breaks through and consolidates above the resistance level of 1.3289, the uptrend will resume with a high probability.