The Analytical Overview of the Main Currency Pairs on 2023.12.14

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0792
• Prev. Close: 1.0873
• % chg. over the last day: +0.75%

Today, the European Central Bank (ECB) will hold a monetary policy meeting. With a probability of almost 100%, the ECB will leave the interest rate at 4.5%. There is growing evidence that the Governing Council is divided on what to convey to the markets. Some board officials said they remain open to the prospect of a further rate hike, and others said it is too early to discuss a rate cut, and still others acknowledged that a rate cut will indeed be considered during 2024. Meanwhile, downward revisions to GDP growth and inflation forecasts are expected. Markets are currently pricing in a 135 bps rate cut from the ECB over the next 12 months, with the first rate cut in March 2024 already a reality.

Trading recommendations

• Support levels: 1.0827,1.0791,1.0766,1.0728
• Resistance levels: 1.0904,1.0938,1.0964

The trend on the EUR/USD currency pair on the hourly time frame has changed to an upward trend. The price confidently broke through the priority change level and consolidated above. Now, the price has reached the resistance level of 1.0904. Given the fact that the price has deviated strongly from the moving averages, it is quite risky to buy here, and it is better to wait for a pullback to the nearest support levels. Selling can be sought from the resistance level of 1.0904 or 1.0938, but only with confirmation, as the level has already been tested. Buying can be considered from 1.0827, or the moving average lines, but also with confirmation in the form of buyers’ reaction.

Alternative scenario:

if the price breaks the support level at 1.0766 and consolidates above it, the downtrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.2561
• Prev. Close: 1.2616
• % chg. over the last day: +0.44%

The Bank of England (BoE) will hold its monetary policy meeting today. The MPC is expected to leave rates at 5.25% but maintain a hawkish tone on keeping rates “higher and longer” in an attempt to dampen speculation of an imminent rate cut. So far, markets’ reassessment of the Bank of England has been less aggressive. Investors are expecting three Bank of England rate cuts next year compared to five ECB rate cuts, with the Bank of England’s first move not coming until June at the earliest, while the ECB and Fed could begin the process of cutting rates as early as March. In the short term, this should give confidence to the British currency against the euro and the dollar.

Trading recommendations

• Support levels: 1.2575,1.2548,1.2499
• Resistance levels: 1.2652,1.2667,1.2705,1.2723

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 bullish one. The price confidently broke through the level of priority change and consolidated above the moving averages. In the Asian session, the price found the resistance level where sellers showed a moderate reaction. The MACD and moving averages show that the price has deviated strongly, so we should expect a small correction before the price continues to rise. Selling can be looked for from the resistance level of 1.2652 or 1.2667, but subject to sellers’ reaction. Buying is best looked for from 1.2572 or EMA lines, but also with intraday confirmation.

Alternative scenario:

if the price breaks the support level at 1.2499 and consolidates below, the downtrend will likely resume.

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 145.51
• Prev. Close: 142.88
• % chg. over the last day: -1.84%

The confidence of a wide range of Japanese companies rose in the fourth quarter. The Tankan sentiment index among the country’s largest manufacturers rose from 9 to 12 in December, marking the third consecutive quarterly increase. Tankan business sentiment among the largest non-manufacturing companies also improved to 30 from 27, exceeding economists’ expectations and setting a new 32-year high. The data on strengthening corporate sentiment is a positive sign for the Bank of Japan (BoJ), as it raises the likelihood that companies will be able to continue to implement large wage increases, which the central bank hopes could lead to a positive wage-price cycle, paving the way for monetary policy normalization.

Trading recommendations

• Support levels: 140.95,140.07,139.34
• Resistance levels: 142.05,143.77,144.71,145.99.

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bearish. Yesterday, the yen strengthened significantly on the fall of the dollar. At the Asian session, the price found a support level of 140.95, where buyers showed a moderate reaction. The MACD indicator is in the negative zone, with no signs of divergence. The price is likely to renew at the minimum but after a small correction. Sell trades can be sought from the resistance level of 142.05, provided the sellers’ initiative on the lower timeframes. If this level is broken, the price may jump to 143.77, which can also be considered for selling. Buying should be looked for from the support level of 140.95, but also with confirmation from buyers.

Alternative scenario:

if the price consolidates above the resistance level of 145.99, the uptrend will likely resume.

The XAU/USD currency pair (gold)

Technical indicators of the currency pair:

• Prev. Open: 1980
• Prev. Close: 2024
• % chg. over the last day: +2.22%

The falling dollar and lower global bond yields were bullish for precious metals on Wednesday. Gold prices jumped more than $30 an ounce after Fed Chairman Jerome Powell said he believes rates are at or near their peak in this cycle. At the same time, the FOMC lowered its median forecast for the federal funds interest rate at the end of 2024 to 4.625% from 5.125% in September, implying a 75 bps rate cut next year. Markets are factoring in an 85% chance of a 25 bps rate cut at the March 19-20, 2024 FOMC meeting. For precious metals, this is undoubtedly a green light.

Trading recommendations

• Support levels: 2008,1997,1987,1973
• Resistance levels: 2040,2058,2081,2142.

From the point of view of technical analysis, the trend on the XAU/USD is bearish, but it is likely to change to bullish in the coming days. The price has reached the level of priority change and is trading near it. The MACD is overbought, so it is unwise to open buy deals here. The support level of 2008 or 1997 can be considered for buying but with confirmation in the form of buyers’ reactions. Selling can be looked for from resistance levels 2040 or 2058 but with confirmation in the form of sellers’ initiative.

Alternative scenario:

if the price breaks and consolidates above the resistance level of 2040, the uptrend will likely resume.