The Analytical Overview of the Main Currency Pairs on 2023.12.27

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.1003
• Prev. Close: 1.1041
• % chg. over the last day: +0.34%

EUR/USD gained 0.34% on Tuesday and reached a 4-month high. The dollar weakness on Tuesday was the main support factor for the euro. Forex trading activity was weak on Tuesday as European markets were closed due to the Boxing Day holiday. Swaps estimate the chances of a 25 bps ECB rate cut at 3% at the next meeting on January 25 and 60% at the next meeting on March 7.

Trading recommendations

• Support levels: 1.1010,1.0954,1.0929,1.0906,1.0891,1.0827,1.0791,1.0766
• Resistance levels: 1.1046,1.1100

The trend on the EUR/USD currency pair on the hourly time frame is bullish. At the moment, the price has almost reached the important resistance level of 1.1046, but the reaction of sellers is weak. A divergence forms on the MACD indicator, indicating a high probability of a corrective wave. Under such market conditions, buy trades can be considered from the support level of 1.1010 but are subject to buyers’ reactions. Sell deals can be sought from the resistance level of 1.1046, with confirmation and short targets, as these will be positions against the trend. Also, do not count on big moves in the week before New Year’s Eve — volatility is usually low during this period.

Alternative scenario:

if the price breaks the support level at 1.0888 and consolidates above it, the downtrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.2686
• Prev. Close: 1.2723
• % chg. over the last day: +0.29%

According to economists, the Bank of England intends to cut interest rates by at least 125 basis points next year, with the first quarter-point cut coming at the MPC meeting on May 9. This dovish reassessment is partly due to recent reports on UK inflation and GDP. As a result, some banks see UK inflation at 3% at the end of H1 2024, while others see it falling to the Bank of England’s 2% target. Lower inflation will be needed next year to give a boost to the weak UK economy, which is close to recession.

Trading recommendations

• Support levels: 1.2676,1.2641,1.2613,1.2572,1.2548,1.2499
• Resistance levels: 1.2733,1.2762,1.2796

From the point of view of technical analysis, the trend on the GBP/USD currency pair on the hourly time frame is bullish. The British pound is starting to lose ground compared to the euro. At the moment, the price is trading near the resistance level of 1.2733. The moving averages provide support and do not allow the price to decline. Buying is best sought on intraday time frames from the void liquidity area or from the EMA lines but with confirmation. For selling, the level of 1.2733 or 1.2762 can be considered, provided the sellers react accordingly.

Alternative scenario:

if the price breaks the support level at 1.2611 and consolidates below, the downtrend will likely resume.

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 142.29
• Prev. Close: 142.39
• % chg. over the last day: +0.07%

The yen weakened on Tuesday amid dovish comments from BoJ Governor Ueda, who said that he is in no hurry to end the Bank of Japan’s ultra-easy monetary policy. Japan’s economic news on Tuesday was mixed for the yen. Japan’s unemployment rate for November was unchanged at 2.5%, matching expectations. However, the jobs to job seekers ratio in November unexpectedly declined by 0.2 to 1.28, which was weaker than expectations of no change at 1.30 and indicates a softening labor market.

Trading recommendations

• Support levels: 141.91,141.44,140.95,140.07,139.34
• Resistance levels: 142.64,143.32,143.98,144.71,145.99

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bearish. The price is trading in the 141.91-142.64 range, forming a flat accumulation. The MACD indicator has become inactive, with the price pressing against the upper boundary, increasing the probability of an upside breakout. Under such market conditions, sell deals can be sought from the resistance level of 142.64, provided sellers take the initiative on the lower time frames. Buying should be sought from the support level at 141.91, but also subject to reaction from buyers, as the level has already been tested. A breakdown/breakout of one of the boundaries will open the way to the next level.

Alternative scenario:

if the price consolidates above the resistance level of 144.96, the uptrend will likely resume.

The XAU/USD currency pair (gold)

Technical indicators of the currency pair:

• Prev. Open: 2053
• Prev. Close: 2068
• % chg. over the last day: +0.73%

A weaker dollar and lower T-note yields supported gold prices on Tuesday. Gold prices are also supported by expectations that the Federal Reserve will begin cutting interest rates next year. However, the rise in stock indices on Tuesday reduced demand for precious metals.

Trading recommendations

• Support levels: 2055,2046,2034,2027,2015,2008,1997,1987,1973
• Resistance levels: 2068,2081,2142

From the point of view of technical analysis, the trend on the XAU/USD is bullish. The price is trading near the 2068 resistance level, but each time the level is tested, the sellers’ reaction becomes less and less pronounced. The support level of 2055 can still be considered as support for further growth, but the price may correct to 2046 if the dollar finds support amid geopolitical risks in the Middle East. A move below 2046 is undesirable for buyers as it may trigger a wave of sell-offs. Selling can be sought from the resistance level of 2068, but only with confirmation. Intraday selling should be done only with short targets, as these will be positions against the main trend.

Alternative scenario:

if the price breaks below the support level of 2015, the downtrend will likely resume.