The Analytical Overview of the Main Currency Pairs on 2024.01.08

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0946
• Prev. Close: 1.0942
• % chg. over the last day: +0.04%

The latest US jobs report, which showed a larger-than-expected increase in non-farm payrolls, lowered expectations that the Federal Reserve may cut interest rates as early as March. The Eurozone Consumer Price Index for December rose from 2.4% y/y to 2.9% y/y, which was in line with expectations. Core inflation (excluding food and energy prices) fell to 3.4% y/y in December from 3.6% y/y in November, which matched expectations and was the lowest rate of growth in 21 months. Markets estimate the odds of a 25 bps rate cut at the next FOMC meeting on January 30-31 at 7% and 70% at the March 19-20 meeting. Swaps estimate the odds of a 25 bps ECB rate cut at 4% at the next meeting on January 25 and 49% at the March 7 meeting. A resilient US labor market and lower Eurozone inflation could push back the first-rate cut by central banks.

Trading recommendations

• Support levels: 1.0933,1.0900,1.0888,1.0827
• Resistance levels: 1.0964,1.1010,1.1080,1.1097,1.1171

The trend on the EUR/USD currency pair on the hourly time frame is downtrend. On Friday, the price-tested liquidity was below Wednesday’s low at 1.0982, followed by a sharp bullish momentum. However, the price failed to consolidate above 1.0964, forming a new false breakout. Under such market conditions, buying can be sought from the support level of 1.0933 with a target of 1.1010. It is better to enter with confirmation, as the bias is bearish now. If the price consolidates below 1.0933, it will open the way to 1.0864. Sell deals can be sought from the resistance level of 1.1010 or after a breakdown of the support level of 1.0933.

Alternative scenario:

if the price breaks the resistance level of 1.1080 and consolidates above it, the uptrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.2683
• Prev. Close: 1.2719
• % chg. over the last day: +0.28%

Data released on Friday indicated that British service sector activity grew in December, suggesting that the economy may be avoiding recession. But the Bank of England (BoE) is facing calls from business leaders concerned about the economy to cut interest rates. Investors expect the first interest rate cut in May, but much will depend on inflation and GDP data. The Bank of England will hold rates for as long as possible until economic indicators start to sound the alarm.

Trading recommendations

• Support levels: 1.2695,1.2670,1.2611,1.2572,1.2548,1.2499
• Resistance levels: 1.2759,1.2787,1.2808,1.2881,1.2937

From the point of view of technical analysis, the trend on the GBP/USD currency pair on the hourly time frame is bearish. But on Friday, the price sharply returned to the level of priority change, forming a false breakdown zone below, which will now act as support. Buying can be looked for from the support levels of 1.2695 or 1.2670, but with confirmation. Selling can be looked for intraday with a target to the nearest support levels.

Alternative scenario:

if the price breaks through the resistance level of 1.2759 and consolidates above it, the uptrend will likely resume.

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 144.57
• Prev. Close: 144.57
• % chg. over the last day: 0.0%

The Japanese yen extended losses on Friday and hit a 3-week low against the dollar. With the Bank of Japan (BoJ) not signaling that the era of ultra-loose policy conditions is coming to an end, the Japanese yen is fundamentally under pressure again. As early as tomorrow, Japan will release the Tokyo Inflation Report for December, which is a leading indicator of overall inflation in the country. Tokyo CPI data for November showed a marked slowdown in both core and core consumer prices. A further cooling of inflation in the Japanese capital could signal a similar reaction in the national CPI data for the month and indicate that Japanese policymakers will not be in a hurry to take interest rates out of negative territory. In that case, the yen will continue to fall against the dollar.

Trading recommendations

• Support levels: 143.29,142.18,141.12,140.78,140.25
• Resistance levels: 144.94,145.99

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bullish. On Friday, the price reached the resistance level of 145.99, which was followed by a sharp reaction from sellers. The change in price structure and divergence on MACD indicates the beginning of the corrective movement. Under such market conditions, sell deals can be sought from the resistance level of 144.94, but with confirmation. Buying should be considered after updating the low Friday. The most optimal level for buying is 143.29.

Alternative scenario:

if the price consolidates below the support at 141.729, the downtrend will likely resume.

The XAU/USD currency pair (gold)

Technical indicators of the currency pair:

• Prev. Open: 2043
• Prev. Close: 2044
• % chg. over the last day: +0.01%

Gold prices came under pressure on Friday after a stronger-than-expected US jobs report for December, and accelerating consumer price growth in the Eurozone dampened expectations that the Fed and ECB will soon start cutting interest rates. However, the dollar reversal on Friday triggered short covering in metals after the dollar index retreated from a 3-week high and headed lower. The gold price is now displaying market expectations for a rate cut. Any signs or even rumors that rates will be cut soon will be positive for gold and vice versa. At the moment, analyzing the probability of rate cuts from the US Fed and ECB is the best fundamental indicator for the medium-term trend of gold.

Trading recommendations

• Support levels: 2036,2028,2015,2008,1997,1987,1973
• Resistance levels: 2063,2072,2084,2090,2142

From the point of view of technical analysis, the trend on the XAU/USD is bullish. On Friday, the price tested the priority change level, but the buyers showed a reaction. As a result of Friday’s decline, a false breakdown zone was formed, which can be used as a support. For buy deals, the most optimal level will be the support of 2036, but it is important to see the reaction of buyers. A breakdown of 2036 is undesirable, as it will sharply increase the probability of an impulsive downward movement and a change of priority.

Alternative scenario:

if the price breaks below the support level 2028, the downtrend will likely resume.