The Analytical Overview of the Main Currency Pairs on 2024.01.02

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.1061
• Prev. Close: 1.1036
• % chg. over the last day: -0.22%

The US dollar started the fourth quarter on the rise, briefly reaching its strongest position in almost a year. However, the dollar was unable to sustain the upward momentum for long. With inflation falling, markets began to forecast aggressive rate cuts over the next few years in an attempt to get ahead of the US Federal Reserve’s next easing cycle. In December, the FOMC changed its rhetoric to a more dovish tone and sent a clear signal that officials want to change policy in time to ensure a soft landing. This will put pressure on the dollar in the coming weeks. But any pause in or reversal of the underlying trend in consumer prices next year could be a disaster for sentiment, leading to a revision to hawkish interest rate expectations.

Trading recommendations

• Support levels: 1.1010,1.0956,1.0928,1.0888,1.0827
• Resistance levels: 1.1097,1.1097,1.1171

The trend on the EUR/USD currency pair on the hourly time frame is bullish. The price is approaching the important support level of 1.1010. For buy deals, it is critical to see the reaction to the level. Since the level has been tested earlier, the probability of a breakdown is high. A breakdown of 1.1010 will open the way for the price to 1.0956. Sell deals can be sought from the resistance level of 1.1097, but also with confirmation and short targets, as these will be positions against the main trend.

Alternative scenario:

if the price breaks the support level at 1.0928 and consolidates above it, the downtrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.2730
• Prev. Close: 1.2748
• % chg. over the last day: +0.14%

It is likely that the Bank of England (BoE) will have to revise its inflation expectations downward in its next quarterly report. The Bank of England’s summary shows that growth in the UK economy will be flat in 2024, with a modest acceleration in 2025. If these forecasts are correct and could be raised in February, it will become increasingly difficult for the Bank of England to ignore market calls for a series of interest rate cuts. Looking at current UK interest rate expectations for this year, financial markets are already pricing in 5 rate cuts of 25 basis points, with the first move likely to occur at the May MPC meeting. Such an easing policy review could put pressure on sterling in the first quarter of 2024.

Trading recommendations

• Support levels: 1.2694,1.2682,1.2633,1.2611,1.2572,1.2548,1.2499
• Resistance levels: 1.2787,1.2808,1.2881,1.2937

From the point of view of technical analysis, the trend on the GBP/USD currency pair on the hourly time frame is bullish. But the price is slowly moving towards the level of priority change. The nearest support level from which you can look for buying is 1.2694, but it is better with confirmation, as the price can sell up to 1.2682. There are no optimal entry points for selling right now.

Alternative scenario:

if the price breaks the support level at 1.2682 and consolidates below, the downtrend will likely resume.

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 141.34
• Prev. Close: 141.02
• % chg. over the last day: -0.22%

The USD/JPY pair held high positions in the first half of Q4 2023 before declining from the highs. The decline gained momentum after growing talk in late November of a policy shift by the Bank of Japan. But at its Dec. 19 meeting, the Bank of Japan (BoJ) maintained all of its loose monetary policy settings. Economists still believe that Ueda’s team will eventually achieve the monetary policy changes the market expects, if not in the first quarter of 2024, then in the second quarter. Therefore, the key indicator to watch in Q1 will be wage growth. Sustained wage growth will be a harbinger of a policy change. Against this background, the fundamental backdrop for the USD/JPY currency pair for the first months of 2024 remains bearish.

Trading recommendations

• Support levels: 140.95,140.07,139.34
• Resistance levels: 141.59,142.45,143.38,143.98,144.71,145.99

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bearish. After bouncing from the support zone, the price reached the resistance level at 141.59. Today is a bank holiday in Japan, so there is a high probability the price will not be able to break out this level on low volatility. Under such market conditions, sell deals can be sought intraday from the resistance level at 141.59, provided sellers take the initiative. Buying should be sought from the support level at 140.95, but also on the condition of a reaction from buyers, as the level has already been tested. A breakdown of 140.95 will open the way to 140.07.

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: 2066
• Prev. Close: 2063
• % chg. over the last day: -0.14%

Gold showed how volatile it can be during 2023. The precious metal declined in the third quarter as the dollar, and Treasury yields rose but reversed course in the fourth quarter as the dollar and yields fell sharply. Gold also showed its appeal as a safe-haven asset during the banking turmoil in March, as well as the early days of the war between Israel and Hamas, with the commodity eventually breaking the previous all-time high. In the first quarter of 2024, US growth is expected to slow, and inflation is expected to continue to progress, putting pressure on the Fed to cut higher interest rates. Overall, the fundamental picture speaks in favor of bullish potential.

Trading recommendations

• Support levels: 2060,2045,2027,2015,2008,1997,1987,1973
• Resistance levels: 2072,2084,2090,2142

From the point of view of technical analysis, the trend on the XAU/USD is bullish. On the last trading day of 2023, gold reached the support level of 2060, where buyers showed their reaction. Now, the price has bounced to the resistance level of 2072. A breakout of this level will open the way to 2084. If the price shows a bearish reaction, then we can consider selling with a target of 2060.

Alternative scenario:

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