The Analytical Overview of the Main Currency Pairs on 2023.07.20

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.1222
• Prev. Close: 1.1202
• % chg. over the last day: -0.17%

The Eurozone’s inflation data came out mixed yesterday. On the one hand, overall inflation fell from 6.1% to 5.5%. On the other hand, core inflation (excluding food and fuel prices) rose from 5.3% to 5.5%, all in annualized terms. Core inflation is the key indicator that the ECB targets. Such figures reinforce the expected 0.25% rate hike next week. But despite the rise in core inflation, some ECB officials believe that core prices have peaked.

Trading recommendations

• Support levels: 1.1206,1.1070,1.1001,1.0958,1.0925,1.0866
• Resistance levels: 1.1272,1.1334

The trend on the EUR/USD currency pair on the hourly time frame is bullish. Now a price corridor is forming. But yesterday, the price made a false breakdown, after which it showed the initiative of buyers and changed the structure on the lower time frames to a bullish one. Under such market conditions, buy trades can be considered from the support level of 1.1206. Sell deals can be considered from the resistance level of 1.1272 but with confirmation in the form of a false breakout reversal, as the level has already been tested

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: 1.3036
• Prev. Close: 1.27471.2938
• % chg. over the last day: -0.75%

The UK inflation rate fell from 8.7% to 7.9% year-on-year. Core consumer prices (excluding food and energy prices) fell from 7.1% to 6.9%. Factory inflation also declined. The data indicate that inflation slowed more than expected, which caused a significant reassessment of expectations for Bank of England policy tightening towards dovish sentiment. This hit the British currency negatively. Now a 25 bps rate hike looks like a more likely scenario at the next meeting.

Trading recommendations

• Support levels: 1.2911,1.2848,1.2797,1.2762,1.2646
• Resistance levels: 1.3011,1.3072,1.3140,1.3308

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, and the level of priority change has not broken yet. The MACD indicator is in the negative zone, but the momentum is ascending. The most optimal level for buying is 1.2911 but with confirmation on the lower time frames. Sell trades are best considered from the resistance level of 1.3011 or 1.3072 but with short targets.

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: 138.81
• Prev. Close: 139.66
• % chg. over the last day: +0.61%

The Governor of the Bank of Japan, Kazuo Ueda, provided a window on the next meeting of the central bank. Ueda stated that changing the ultra-accommodative path of monetary policy would require changing the assessment of inflation target achievement. It should be noted that these statements by Ueda are seen as dovish. Analysts believe that the Bank of Japan will maintain all monetary policy settings next week. But much will also depend on the BoJ’s inflation forecasts.

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. But the price is moving towards the level of priority change. The MACD indicator is inactive. The most suitable level for buying will be 138.49, but with confirmation in the form of buyers’ initiative. Sell trades can be considered from the resistance level of 140.00 but with confirmation in the form of a false breakout.

Alternative scenario:

if the price fixes above the 140.00 resistance level, with a high probability, the uptrend will resume.

The USD/CAD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.3166
• Prev. Close: 1.3163
• % chg. over the last day: -0.02%

The monetary policies of the Bank of Canada and the US Fed are now in sync – both central banks are at the end of the tightening cycle. Therefore, the main imbalance in USD/CAD pricing will come from oil prices. Crude oil prices declined yesterday even though the government data showed that US crude oil inventories declined last week more than expected. Demand for oil is holding strong and production levels are declining, which supports the price of black gold and hence the Canadian dollar.

Trading recommendations

• Support levels: 1.3133,1.3108
• Resistance levels: 1.3155,1.3212,1.3243,1.3329,1.3383,1.3426

From the point of view of technical analysis, the trend on the USD/CAD currency pair is bearish. Now it has decreased to the buying zone, but at the same time, it has formed a resistance level above. The MACD indicator is in the negative zone, and there is sellers’ pressure inside the day. It is better to buy from the level of 1.3133 but with confirmation of the initiative of buyers and holding the price above 1.3155. Sell trades are better to look for from the resistance level of 1.3155 if there is a sellers’ reaction or from 1.3212.

Alternative scenario:

if the price breaks through and consolidates above the resistance level of 1.3243, the uptrend will resume with a high probability.