The Analytical Overview of the Main Currency Pairs on 2023.08.08

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.1006
• Prev. Close: 1.1001
• % chg. over the last day: -0.04%

Industrial production in Germany declined again, which increased fears of further decline in the largest economy of the Eurozone. The main contributors to the negative result were the automotive industry (-3.5%) and the construction sector (-2.5%). German inflation data will also be published today. Consumer prices are expected to decline from 6.4% to 6.2% in annualized terms, but services inflation may show signs of growth again. Money markets are now pricing in the likelihood of an additional 0.25% interest rate hike by the European Central Bank (ECB), but with the Eurozone’s economic data declining, this is likely to be the last hike in this cycle.

Trading recommendations

• Support levels: 1.0973,1.0945,1.0926,1.0866
• Resistance levels: 1.1046,1.1102,1.1198,1.1227

The trend on the EUR/USD currency pair on the hourly time frame is bearish. On Friday, the price reached the daily support level, which was followed by a buyers’ reaction, with an intraday structure change. The MACD indicator is now inactive, but intraday buying pressure remains. Under these market conditions, buy trades can be considered from support levels 1.0973 or 1.0945, but with confirmation in the form of buyer reaction. Sell deals can be considered from the resistance level of 1.1046 but with confirmation in the form of a false breakout.

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: 1.2742
• Prev. Close: 1.27471.2782
• % chg. over the last day: +0.28%

The situation on the GBP/USD currency pair has not changed much. The Bank of England is likely to stick to its tightening cycle until spring 2024, which opens the British currency to strengthening prospects against the dollar, euro, and Japanese yen. Friday’s UK GDP data will show how the economy is feeling in a period of rising rates. And if the data disappoints badly, the Bank of England may moderate its hawkish bias.

Trading recommendations

• Support levels: 1.2715,1.2676,1.2649
• Resistance levels: 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. But the buyers are gradually seizing the initiative and moving the price to the level of priority change. Two buying zones have already been formed below the price, which will protect the price from falling. The MACD indicator has become positive, and the correction has started. The most optimal level for buying is 1.2715 or 1.2676 but with confirmation on the lower time frames. Sell trades are best considered from the resistance level of 1.2804 but with confirmation in the form of a false breakout and 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: 141.81
• Prev. Close: 142.47
• % chg. over the last day: +0.46%

Bank of Japan (BoJ) officials made it clear that the yield curve adjustment announced on July 28 is a means to sustainably extend the current loose monetary policy. The BoJ decided to allow 10-year Japanese government bond yields to trade “flexibly” above 0.5% rather than impose that level as a cap. Investors had expected the adjustment to be the first step toward normalizing monetary policy as wages and inflation rise. However, BoJ officials are not yet convinced that inflation is demand-driven and can sustainably continue above 2%. Thus, there are no fundamental factors for the Japanese yen to strengthen now.

Trading recommendations

• Support levels: 142.64,140.98,140.71,139.57
• Resistance levels: 143.47,143.32,145.00

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bullish. The bullish trend continues, and the pressure of buyers is growing again. The MACD indicator has returned to the positive zone. The most suitable level for buying is 142.64 but with confirmation in the form of buyers’ initiative on the lower time frames. Sell trades can be considered from the resistance level of 143.47 but with confirmation in the form of sellers’ initiative.

Alternative scenario:

if the price fixes below the 140.70 support level, with a high probability that the downtrend will resume.

The USD/CAD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.3383
• Prev. Close: 1.3368
• % chg. over the last day: -0.11%

The Canadian dollar has been struggling lately despite the excellent rally in the oil markets. The correlation between the Canadian dollar and oil prices has fallen sharply. Over the past few weeks, there has been a positive correlation between the instruments, with USDCAD rising as oil prices rise. There have been similar periods in the past, but they were usually short-term. This is partly due to the strengthening of the US dollar. Partly it is due to market participants believing that the Bank of Canada has peaked on rates. The probability of such a scenario is 72%, and it may play against the Canadian dollar, as the Bank of England, the ECB, and possibly the Fed may hold another interest rate hike before the end of the year.

Trading recommendations

• Support levels: 1.3342,1.3281,1.3263,1.3224,1.3199,1.3150,1.3131
• Resistance levels: 1.3386,1.3426

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. On Friday, a false breakdown zone was formed, which can act as support for further growth. However, the MACD indicator is still showing signs of impending corrective movement. It is better to buy after a pullback to the support level of 1.3342 or, in case of a deeper correction – to 1.3281. Sell trades are best sought from the resistance level of 1.3386, subject to a false breakout, as the level has already been tested.

Alternative scenario:

if the price breaks through and consolidates below the support level of 1.3263, the downtrend will resume with a high probability.