The Analytical Overview of the Main Currency Pairs on 2023.08.03

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0980
• Prev. Close: 1.0938
• % chg. over the last day: -0.38

The dollar index strengthened sharply yesterday. The latest ADP economic data showed that the private sector added 324,000 jobs in July. This was almost double the consensus forecast, a sign that the US labor market is still robust. Fitch Ratings’ decision to downgrade US debt was also likely a factor in bond movements, prompting some traders to reduce their positions in these fixed-income securities. As a result, this led to a rise in yields and a rise in the US currency.

Trading recommendations

• Support levels: 1.0926,1.0866
• Resistance levels: 1.0974,1.1046,1.1102,1.1198,1.1227

The trend on the EUR/USD currency pair on the hourly time frame is bearish. The price moved further lower and reached the next support level. The MACD indicator has become negative again, but the selling pressure is weak, with divergence formed on several time frames. Under such market conditions, buy trades can be considered from the support level of 1.0926 but with confirmation on the lower time frames. Sell trades can be considered from the resistance level of 1.0974 or 1.1046 but with confirmation in the form of sellers’ initiative.

Alternative scenario:

if the price breaks through the resistance level of 1.1046 and fixes above it, the uptrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.2768
• Prev. Close: 1.27471.2709
• % chg. over the last day: -0.46%

The Bank of England (BoE) monetary policy meeting will take place today. There is no doubt that the BoE will raise interest rates. The question is how strong that increase will be. A 25 bps rate hike is priced at 75% probability, but a larger 50 bps hike is still on the table. After June’s inflation data, with the UK CPI falling below 8% and core CPI declining, the case for an aggressive rate hike has weakened considerably. The latest PMI manufacturing data disappointed economists. But in any case, the interest rate differential between the US Fed and the Bank of England will narrow after this meeting, which should support the British currency in the near term.

Trading recommendations

• Support levels: 1.2682
• Resistance levels: 1.2741,1.2804,1.2880,1.2913,1.2942,1.3011,1.3072

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 next support level. The MACD indicator is in the negative zone, but the signs of divergence are observed in several time frames. The most optimal level for buying is 1.2682 but with confirmation on the lower time frames. Sell trades are best considered from the resistance level of 1.2741 but with confirmation in the form of sellers’ initiative.

Alternative scenario:

if the price breaks through the resistance level of 1.2804 and fixes above it, the uptrend will most likely resume.

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 143.31
• Prev. Close: 143.31
• % chg. over the last day: 0.0%

The Bank of Japan is now willing to allow the 10-year Japanese government bond yield to exceed the previously set limit of 0.5%, and recent policymakers’ statements indicate that the new limit will be 1%. Thus, the normalization of BOJ policy is not as close as investors expected it to be. There are no fundamental factors for the Japanese yen to strengthen, so the US dollar will create the dynamics of USD/JPY quotes for the coming weeks.

Trading recommendations

• Support levels: 142.93,140.97,140.71,139.57
• Resistance levels: 143.54,145.00

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bullish. The price is trading above the moving averages but has reached the daily resistance level. The MACD indicator is in the positive zone with signs of divergence. There is a high probability of a corrective downward movement. The most suitable level for buying will be 142.93 but with confirmation in the form of buyers’ initiative on the lower time frames. Sell trades can be considered from the resistance level of 143.54, but with 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 fixes below the 138.86 support level, with a high probability that the downtrend will resume.

The USD/CAD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.3280
• Prev. Close: 1.3349
• % chg. over the last day: +0.52%

The Canadian dollar, being a commodity currency, is losing ground amid falling oil prices, as well as due to the growth of the dollar index. The dollar index is rising due to strong labor market data, which leaves room for the US Federal Reserve to raise rates further. The US Treasury Department on Wednesday said it plans to increase sales of long-term debt to $103 billion next week from $96 billion previously. Debt sales cause their yields to rise, which in turn causes the dollar to rise.

Trading recommendations

• Support levels: 1.3281,1.3224,1.3199,1.3150,1.3131
• Resistance levels: 1.3357,1.3383,1.3426

From the point of view of technical analysis, the trend on the USD/CAD currency pair is bullish. The price is trading above the moving averages but has reached the daily resistance level. The MACD indicator shows buying pressure, but there are signs of overbought and divergence. This indicates a correction is imminent. It is better to buy after a pullback to the support level of 1.3281. Sell trades are better to look for from the resistance level of 1.3357, subject to a pullback and change of structure on the lower time frames.

Alternative scenario:

if the price breaks through and consolidates below the support level of 1.3150, the downtrend will resume with a high probability.