The Analytical Overview of the Main Currency Pairs on 2023.12.20

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0913
• Prev. Close: 1.0980
• % chg. over the last day: +0.61%

Dovish comments from US Fed representatives and hawkish comments from ECB politicians provoked the growth of EUR/USD quotes. President of FRB Richmond Barkin and President of FRB Atlanta Bostic supported the view that the Fed will cut interest rates soon if the progress in inflation continues. At the same time, ECB policymakers Kazaks and Simkus denied the assumptions that the ECB will cut interest rates already in the first quarter of next year. Thus, the euro will get an advantage over the US dollar because the interest rate differential between banks will decrease.

Trading recommendations

• Support levels: 1.0947,1.0906,1.0891,1.0827,1.0791,1.0766,1.0728
• Resistance levels: 1.0980,1.1008,1.1046,1.1100

The trend on the EUR/USD currency pair on the hourly time frame is bullish. The resistance level at 1.0950 did not react to the price and was easily broken. At the same time, the price showed a bearish reaction to the resistance at 1.0980. The MACD indicator became positive, but momentum is now behind the sellers. Under such market conditions, buy trades can be considered from the support level of 1.0947 but are subject to sellers’ reaction. In case this level is broken, the price may fall again to 1.0906. Selling can be looked for from the resistance level of 1.0980, but also with confirmation and short targets, as these will be positions against the trend.

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: 1.2643
• Prev. Close: 1.2729
• % chg. over the last day: +0.68%

Inflation data will be released in the UK today. Core consumer inflation is expected to fall to 4.4% y/y from 4.6%, while core inflation (excluding food and energy prices) is expected to fall to 5.5% from 5.7%. Economists believe that cooling energy and food prices will contribute to lower inflation. If inflation data unexpectedly comes out worse than expected (rise or stay at current levels without a decline), it will only reinforce the view of hawkish MPC policymakers to remain more aggressive. This will give the British currency additional fuel for strengthening.

Trading recommendations

• Support levels: 1.2712,1.2682,1.2642,1.2652,1.2572,1.2548,1.2499
• Resistance levels: 1.2762,1.2796

From the point of view of technical analysis, the trend on the GBP/USD currency pair on the hourly time frame is bullish. Yesterday, the British pound reached the resistance level of 1.2762, where sellers showed a reaction. Now, the price is flat ahead of the release of the inflation data. The MACD indicator is positive, and the price is trading above the moving averages. The impulse is more likely to move upwards. But on the volatility burst the price may spike to the level of 1.2682. Therefore, it is better to consider buying on the minute time frames from 1.2682 or 1.2710. In case the price rises, selling is better to look for after a bearish reaction to the resistance level of 1.2762 or 1.2796.

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: 142.74
• Prev. Close: 143.82
• % chg. over the last day: +0.76%

The trade balance data showed that weakening global demand hurts the Japanese economy, which relies heavily on export production. Japan’s exports fell slightly in November from a year earlier, the first decline in three months, while imports fell nearly 12%. The recent weakening of the Japanese yen against the dollar has reduced the purchasing power of imports. This is a negative factor for the Japanese yen, as sluggish external demand will put pressure on the Bank of Japan to continue its stimulus policy.

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. Yesterday, the price reached the resistance level of 144.71, where sellers showed a reaction. The MACD indicator has become neutral again, the price is trading at moving average levels, and there is weak selling pressure intraday. Under such market conditions, sell trades can be sought from the resistance level of 143.98, subject to sellers’ initiative on the lower time frames. Buy deals should be sought after the breakout of 143.98, with a target of 144.71 and higher.

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: 2026
• Prev. Close: 2040
• % chg. over the last day: +0.69%

Dollar weakness on Tuesday was bullish for metal prices. Gold gained support as a store of value on Tuesday after the Bank of Japan maintained negative interest rates and said it would patiently continue to ease monetary policy. Also contributing to gains in precious metals were dovish comments from US Federal Reserve officials that policymakers are considering rate cuts soon.

Trading recommendations

• Support levels: 2033,2017,2008,1997,1987,1973
• Resistance levels: 2043,2058,2081,2142

From the point of view of technical analysis, the trend on the XAU/USD is bearish. The price has again approached the priority change level, and sellers’ reaction is moderately weak. At the same time, an accumulation zone has formed below, which will now protect the price from going down. The support level of 2033 is preferable for opening long trades. Buying can also be considered after the breakout of the level of priority change. Selling can be looked for from the 2043 resistance level, but only with confirmation, as there is a high probability of a breakout.

Alternative scenario:

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