The Analytical Overview of the Main Currency Pairs on 2023.12.21

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0981
• Prev. Close: 1.0938
• % chg. over the last day: -0.39%

The euro came under pressure on Wednesday on signs of easing price pressures in Europe, which is dovish for ECB policy after Germany’s Producer Price Index (which displays the rate of inflation between factories) fell more than expected in November. On the other hand, the Eurozone Consumer Confidence Index for December rose by 1.8 to a 5-month high of minus 15.1, stronger than expectations of minus 16.3. This limited euro losses. Overall, parity between the euro and the dollar has been maintained. With Christmas and New Year ahead, volatility will start to decline today, and the price may go sideways for two weeks.

Trading recommendations

• Support levels: 1.0929,1.0906,1.0891,1.0827,1.0791,1.0766,1.0728
• 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 price starts to form a flat accumulation on the eve of the Christmas holidays. The boundaries of the balance are 1.0929-1.0979. With a high probability the price will remain trading here until the end of the year. Under such market conditions, buy trades can be considered from the support level of 1.0929 but are subject to the reaction of buyers, as the price has already tested the level. In case this level is broken, the price may fall to 1.0906 again. Sell deals can be sought 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: 1.2723
• Prev. Close: 1.2637
• % chg. over the last day: -0.68%

The UK Consumer Price Index declined to 3.9% y/y in November from 4.6% y/y in October, weaker than expectations of 4.3% y/y and the slowest rate of growth in more than two years. Core inflation (excluding food and energy prices) showed a decline from 5.7% y/y to 5.1% y/y. This will undoubtedly be a breath of fresh air for both British consumers and the Bank of England (BoE). The slowdown in inflation has been reinforced by speculation that global central banks may start cutting interest rates early next year. Markets expect a rate cut from the BoE in May 2024.

Trading recommendations

• Support levels: 1.2628,1.2572,1.2548,1.2499
• Resistance levels: 1.2678,1.2712,1.2762,1.2796

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 declined amid a sharp slowdown in inflation, which is a dovish factor for the BoE policy. Now, the price is trading at the support level of 1.2628, and the MACD indicator has become negative. A breakdown of 1.2628 will open the way for the price to 1.2572. Buying is better to consider on the lower time frames from 1.2628, but only with confirmation. In case the price rises, selling is better to look for after a bearish reaction to the resistance level of 1.2678 or 1.2712.

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: 143.75
• Prev. Close: 143.56
• % chg. over the last day: -0.13%

The yen strengthened slightly on Wednesday after Barclays said that the passive rebalancing at the end of the month shows “strong” signs of dollar selling against all major dollar peers, including the yen. But the yen’s gains were limited after JGB 10-yr bond yields fell to a four-month low on Wednesday at 0.555%, weakening the yen’s interest rate differential.

Trading recommendations

• Support levels: 142.55,141.71,140.95,140.07,139.34
• Resistance levels: 143.32,143.98,144.71,145.99

From the technical point of view, the medium-term trend on the currency pair USD/JPY is still bearish. Yesterday, the price reached the resistance level of 143.98, where sellers again showed a reaction. The MACD indicator turned negative, with weak selling pressure intraday. Under such market conditions, sell trades can be sought from the resistance level of 143.32, subject to sellers’ initiative on the lower time frames. Buying should be sought from the support level of 145.55, but also subject to reaction 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: 2040
• Prev. Close: 2030
• % chg. over the last day: -0.49%

Geopolitical tensions were a key factor this week after the events in the Middle East. The Red Sea has become a breeding ground for uncertainty, and it looks like it will only increase. This leaves gold on the upside unless a solution is found to the ongoing disagreements and tensions in the Middle East. The fundamental weakness in the dollar on expectations of a rate cut soon will also be positive for gold prices. A strong Q3 GDP report is expected in the US today, which may temporarily strengthen the dollar and put pressure on precious metals.

Trading recommendations

• Support levels: 2027,2017,2008,1997,1987,1973
• Resistance levels: 2043,2058,2081,2142

From the point of view of technical analysis, the trend on the XAU/USD is close to changing to an upward trend. However, the resistance level of 2043 has not been broken yet. Sellers are stubbornly defending this level. But we should keep sight of the fact that an accumulation zone was formed below, which will protect the price from going down. The support level of 2027 demonstrated it yesterday. Buy deals can be considered after the breakout of the level of priority change or from the 2027 support level. Going below 2027 is undesirable for buyers, as it may cause a wave of sell-offs. Selling can be looked for from the resistance level of 2043, 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.