The Analytical Overview of the Main Currency Pairs on 2023.12.07

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0789
• Prev. Close: 1.0763
• % chg. over the last day: -0.24%

On Wednesday, Deutsche Bank said it expects the European Central Bank (ECB) to cut interest rates by 150 basis points (bps) next year, 50 bps more than its previous forecast, as inflation falls and central bank officials take a less hawkish tone. Data released last week showed Eurozone inflation fell to 2.4%, well below expectations for the third consecutive month. ECB spokesperson Isabel Schnabel, a known hawk, removed the question of further rate hikes this week, prompting traders to move bets on the first-rate cut to March next year. This is one of the main reasons for the euro’s weakness.

Trading recommendations

• Support levels: 1.0755,1.0728,1.0700,1.0664
• Resistance levels: 1.0798,1.0847,1.0894,1.0961,1.0994,1.1004

The trend on the EUR/USD currency pair on the hourly time frame has changed to a downtrend. The price is trading below the moving averages, and a descending wedge is formed, which is a trend reversal pattern. Now, the price has found the support level of 1.0755, but there is no buyers’ reaction, therefore, the price may go down to 1.0728. Taking into account the formed divergence on the MACD indicator, there is a high probability of correction to the nearest resistance levels from one of these support levels. Selling can be looked for only intraday from moving average levels with confirmation in the form of sellers’ reaction. Buying can only be considered after a breakout of the descending wedge.

Alternative scenario:

if the price breaks the resistance level at 1.0894 and consolidates above it, the uptrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.2592
• Prev. Close: 1.2557
• % chg. over the last day: -0.28%

In its semi-annual Financial Stability Report, the Bank of England noted that British businesses and households have so far coped with rising interest rates, but the adjustment process is far from complete, and banks should prepare for changes in the way they finance. Bank of England officials recognize signs of a slowing economy but are not thinking about cutting rates because of signs that inflationary pressures will remain strong. The Bank of England also noted that the overall risk environment remains challenging due to China’s economic problems, the risk of widening conflict in the Middle East, and high levels of government debt.

Trading recommendations

• Support levels: 1.2543,1.2525,1.2478,1.2448,1.2347,1.2309
• Resistance levels: 1.2612,1.2651,1.2687,1.2723,1.2745

From the point of view of technical analysis, the trend on the GBP/USD currency pair on the hourly time frame has changed to a downtrend. Despite the initial resistance to the growth of the dollar, the British pound showed weakness. At the moment, the price has found support at 1.2543, but there is no reaction from buyers. Hence, the price may decline to 1.2525. Given the MACD divergence and the formation of a descending wedge, the price may correct upward in the coming days, but we need to wait for confirmation in the form of a bullish reaction and a breakout of the descending trend line. Selling can be sought intraday from the moving average lines but with short targets and close stop-loss levels.

Alternative scenario:

if the price breaks the resistance level of 1.2651 and consolidates above it, the uptrend will likely resume.

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 147.14
• Prev. Close: 147.31
• % chg. over the last day: +0.11%

The Nikkei 225 Stock Index (JP225) rallied by 2% on Wednesday, limiting demand for the Japanese yen. In addition, dovish comments from Bank of Japan (BoJ) Deputy Governor Himino on Wednesday had a negative impact on the yen when he stated that the BoJ would patiently continue its loose monetary policy until a stable inflation target was achieved.

Trading recommendations

• Support levels: 146.66,146.22,145.89
• Resistance levels: 147.35,147.83,148.51,149.32,149.75,150.14

From the technical point of view, the medium-term trend on the currency pair USD/JPY is still bearish. As expected, the price has formed a flat accumulation between the levels of 146.66-147.35. The MACD indicator is negative again, and sellers prevail intraday. Sell trades can be looked for from the level of 146.66, provided the sellers’ initiative on the lower time frames. Buying should be sought after testing the liquidity below 146.22 with the subsequent reaction of buyers.

Alternative scenario:

if the price consolidates above the resistance level of 148.51, the uptrend will likely resume.

The XAU/USD currency pair (gold)

Technical indicators of the currency pair:

• Prev. Open: 2019
• Prev. Close: 2026
• % chg. over the last day: +0.35%

The rise in the dollar index on Wednesday was bearish for metals. Meanwhile, Wednesday’s drop in the 10-year breakeven inflation rate to a 6-month low limited demand for gold as an inflation hedge. However, the decline in global bond yields on Wednesday kept gold from a strong decline. The medium-term picture for gold remains bullish as central banks will cut interest rates throughout 2024.

Trading recommendations

• Support levels: 2020,2005,1998,1979,1955
• Resistance levels: 2041,2058,2079,2145

From the point of view of technical analysis, the trend on the XAU/USD is bullish, but it is close to change. Volatility on gold has decreased, with the price forming a narrowing triangle pattern. As a rule, it is a figure of continuation of the trend, which was before the triangle formation, so the probability of further decline is higher than the probability of growth. But you should be guided not by the price reaction and market conditions. Market conditions are not formed for buying at the moment, because there is no bullish initiative. Selling can be looked for after breaking the support level of 2020 with the target to 2005.

Alternative scenario:

if the price breaks below the support level of 2020, the downtrend will likely resume.