The Analytical Overview of the Main Currency Pairs on 2024.01.19

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0880
• Prev. Close: 1.0875
• % chg. over the last day: -0.05%

The US dollar rose slightly yesterday as better-than-expected US economic reports on weekly jobless claims and December housing starts pushed T-note yields higher. The dollar’s strength on Thursday put pressure on the euro. But losses in EUR/USD were limited by Thursday’s hawkish report on the ECB’s December 13-14 meeting, which showed that ECB officials abandoned market expectations of an ECB interest rate cut.

Trading recommendations

• Support levels: 1.0875,1.0851,1.0827
• Resistance levels: 1.0906,1.0931,1.0985,1.1010,1.1037,1.1080,1.1097,1.1171.

The trend on the EUR/USD currency pair on the hourly time frame is a downtrend. The price reached the support level of 1.0851, where buyers showed a reaction. The price has changed the market structure on the lower time frames, which, taking into account the divergence, increases the probability of a corrective movement. At the same time, the downtrend line keeps the price from further growth. Under such market conditions, price consolidation above the trend line will open the way to 1.0906. Selling can be considered from the trend line after the price consolidates below 1.0875.

Alternative scenario:

if the price breaks the resistance level of 1.0969 and consolidates above it, the uptrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.2670
• Prev. Close: 1.2705
• % chg. over the last day: +0.27%

The UK Consumer Price Index beat forecasts for both core and core inflation, which led to a downward revision of interest rate expectations and provided support to the Pound. But that doesn’t mean inflation will continue to rise further. In the CPI report, the main contributor to the increase in the figure was the rise in tobacco prices caused by the increase in the tax rate. Thus, the ongoing price pressure is short-term in nature as the overall price trend continues to decline. Disinflation (price growth at a declining rate) is likely to continue as long as the Bank of England (BoE) copes with service inflation.

Trading recommendations

• Support levels: 1.2697,1.2626,1.2611,1.2572,1.2548,1.2499
• Resistance levels: 1.2712,1.2787,1.2827,1.2881,1.2937.

From the point of view of technical analysis, the trend on the GBP/USD currency pair on the hourly time frame is bearish. The price corrected to the 1.2712 resistance level. The MACD indicator is in the positive zone, but the buyers’ momentum is weakening. However, the support level at 1.2697 may keep the price from falling. It is better to consider selling after price consolidation below 1.2697. A breakdown of this level will open the way for a decline of more than 300 points (30 pips).

Alternative scenario:

if the price breaks through the resistance level of 1.2764 and consolidates above it, the uptrend will be resumed with a high probability.

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 148.16
• Prev. Close: 148.15
• % chg. over the last day: -0.01%

The Nationwide Core CPI declined from 2.5% to 2.3% year-on-year as expected. This led to a further depreciation of the yen as it further pushed back the Bank of Japan’s (BoJ) plans for policy normalization. Inflation in Japan is unlikely to accelerate much in the next few months, and holding inflation above the 2% target is not enough for the BoJ to remove negative interest rates. For that to happen, policymakers need to see stronger wage growth, which will only become evident after the spring wage negotiations.

Trading recommendations

• Support levels: 148.51,146.80,146.39,145.45,144.33,143.41,142.18,141.12
• Resistance levels: 149.33.

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bullish. The price broke through the support level of 148.51 and continues to grow steadily. Moving averages perfectly support the growth, with the MACD indicator indicating an upward momentum. But on the higher time frames, the divergence continues to form. Under such market conditions, buying should be sought from the support level of 148.51 or from the moving average lines. Selling can be considered as part of the correction from the resistance level of 149.

Alternative scenario:

if the price consolidates below the support at 144.33, the downtrend will likely resume.

The XAU/USD currency pair (gold)

Technical indicators of the currency pair:

• Prev. Open: 2006
• Prev. Close: 2022
• % chg. over the last day: +0.80%

Gold rose yesterday despite the rise in the dollar index. Gold was supported by geopolitical risks in the Middle East as Houthi rebels continued to attack ships in the Red Sea off the coast of Yemen, causing problems for shipping traffic from Asia to Europe, including energy. In addition, rising inflation expectations have boosted demand for gold as an inflation hedge after the 10-year breakeven inflation rate rose to a 2-month high of 2.348% on Thursday.

Trading recommendations

• Support levels: 2019,1997,1987,1973
• Resistance levels: 2023,2033,2048,2064,2072,2084,2090

From the point of view of technical analysis, the trend on the XAU/USD has changed to a downtrend. The price has corrected to the nearest resistance levels, with momentum remaining for the buyers. The MACD indicator is in the positive zone and indicates growth. With these market conditions, selling can be considered when the price consolidates below 2019. A breakdown of 2019 momentum could trigger a sharp wave of selling. Until this happens, the price can confidently rise to 2033.

Alternative scenario:

if the price breaks through and consolidates above the support level of 2049, the uptrend will likely resume.