The Analytical Overview of the Main Currency Pairs on 2023.12.19

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0894
• Prev. Close: 1.0922
• % chg. over the last day: +0.26%

On Monday, the euro showed moderate growth amid hawkish comments from ECB Governing Council representatives Kazimir and Vasle, who denied speculation that the ECB would start cutting interest rates early next year. But the euro’s gains were limited after Germany’s IFO business climate index for the decade unexpectedly fell by 0.8 to 86.4, weaker than expectations of a rise to 87.7. The Eurozone will release its November inflation report today. The figures are expected to remain at current values. However, if the data sharply contrasts with the forecast, it may create an imbalance, which will lead to a sharp movement of quotations. The growth of inflationary pressure will contribute to the strengthening of the euro and vice versa.

Trading recommendations

• Support levels: 1.0906,1.0891,1.0827,1.0791,1.0766,1.0728
• Resistance levels: 1.0950,11.1008,1.1046,1.1100

The trend on the EUR/USD currency pair on the hourly time frame is bullish. Yesterday, the price found support at 1.0891, where buyers showed a moderate reaction. The MACD indicator has become inactive, and the price is flat at moving average levels. Under such market conditions, buy trades can be considered from the support level of 1.0906 but are subject to the reaction of sellers. If this level is broken, the price could fall to 1.0827. Selling trades can be looked for from the resistance level of 1.0950 or 1.0980, but also with confirmation, and it is best to use these levels to close the buys partially.

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: 1.2779
• Prev. Close: 1.2646
• % chg. over the last day: -0.26%

Inflation data and the final third quarter GDP report will be released for the UK this week. UK inflation has been falling over the past few months, and a further decline will increase pressure on Bank of England (BoE) Governor Andrew Bailey to acknowledge that rates will be cut next year, in contrast to his hawkish tone at the last MPC meeting. On the other hand, dollar weakness will prevent the British pound from declining too much. Economists expect a 75 basis point rate cut from the BoE next year, while the US Fed could cut rates by 100-150 bps. Reducing the rate differential will support the British currency against the dollar.

Trading recommendations

• Support levels: 1.2642,1.2652,1.2572,1.2548,1.2499
• Resistance levels: 1.2659,1.2702,1.2745,1.2796

From the point of view of technical analysis, the trend on the GBP/USD currency pair on the hourly time frame is bullish. At the moment, there is a correction within the bullish trend. Yesterday, the British pound reached the support level of 1.2642, which caused buyers to react. But for further growth, it is now very important to break through the intermediate resistance level of 1.2659. Therefore, it is better to consider buying after price consolidation above 1.2659 with a target of 1.2702. Selling is better to look for after breaking the support at 1.2642, after which the way to 1.2572 will open.

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: 142.06
• Prev. Close: 142.76
• % chg. over the last day: +0.49%

On Tuesday, the Bank of Japan (BoJ) left interest rates in negative territory as expected and said that it will continue to take measures to adjust the yield curve to support Japan’s economic growth. The bank said it will continue to allow 10-year yields to move between minus 1 and plus 1 percent as part of its YCC policy. At the October meeting, the bank softened its stance on this range, saying it would allow more flexibility for yields potentially beyond the 1% upper limit. The BoJ did not provide information on its plans to tighten monetary policy in 2024. As a result, the Japanese yen fell by 0.5% following the rate decision as investors were disappointed by the lack of information for 2024.

Trading recommendations

• Support levels: 142.55,141.71,140.95,140.07,139.34
• Resistance levels: 143.77,144.71,145.99

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bearish, but the price is gradually moving towards the priority change level. At the moment, the price has reached the resistance level of 143.77, but the reaction of sellers is weak, which increases the probability of further growth. The MACD indicator has turned positive intraday, and there is buying pressure. Under such market conditions, sell deals can be sought from the resistance level of 143.77, provided sellers take the initiative on the lower time frames. Buying should be sought from the support level of 142.55, but also with confirmation from the 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: 2018
• Prev. Close: 2027
• % chg. over the last day: +0.44%

Gold and silver prices traded mixed on Monday. Gold found support on Monday after Goldman Sachs raised its 12-month gold price target to $2,175 an ounce, citing the Fed’s softer stance and a weak dollar. However, a rise in global bond yields on Monday was a negative factor for metals. In addition, hawkish comments from central banks are a negative factor for precious metals after Fed President Cleveland Mester and ECB Governing Council representatives Kazimir and Vasle rejected any suggestion of a Central Bank rate cut early next year.

Trading recommendations

• Support levels: 2017,2008,1997,1987,1973
• Resistance levels: 2031,2043,2058,2081,2142

From the point of view of technical analysis, the trend on the XAU/USD is bearish. Yesterday, the price reacted with growth to the intermediate support level of 2017. However, it failed to break out the first resistance level. Therefore, the probability of another fall is extremely high. The support levels of 2008 or 1996 are preferable for opening long trades. Selling can be looked for from the resistance level 2031, but also with confirmation.

Alternative scenario:

if the price breaks and consolidates above the resistance level of 2043, the uptrend will likely resume.