The Analytical Overview of the Main Currency Pairs on 2024.02.01

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0838
• Prev. Close: 1.0817
• % chg. over the last day: -0.19%

As expected, the FOMC kept the Fed Funds target range at 5.5% and said that the risks to employment and inflation targets are becoming more balanced. The euro gave up an early rally on Wednesday and suffered moderate losses after hawkish comments from Fed Chair Powell pushed the dollar higher. The euro was also impacted by Wednesday’s consumer price report from Germany, which showed that the January German consumer price index rose less than expected, a dovish factor for ECB policy. ECB Vice President Gindos said that inflation has been delivering mostly positive surprises lately and will be slightly lower than the ECB’s forecast.

Trading recommendations

• Support levels: 1.0795,1.0774
• Resistance levels: 1.0877,1.0915,1.0931,1.0985,1.1010,1.1037.

The trend on the EUR/USD currency pair on the hourly time frame is a downtrend. Yesterday, the price tested liquidity above 1.0877, followed by a reversal. The price declined sharply and has now reached the support level of 1.0795. Buyers’ reaction is weak, so there is a high probability of a further decline to 1.0774. Sell deals can be considered only after the breakdown of 1.0795. It is inexpedient to sell just before the level. A false breakdown of 1.0795 and buyers’ reverse reactions can provoke a growth wave. But for now, the bias remains bearish.

Alternative scenario:

if the price breaks the resistance level of 1.0885 and consolidates above it, the uptrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.2692
• Prev. Close: 1.2686
• % chg. over the last day: -0.05%

The Bank of England (BoE) will hold its first meeting of the year today. The Bank of England is expected to keep the policy rate at 5.25% at the current meeting, so traders will be keeping a close eye on the distribution of votes among policymakers and scrutinizing the accompanying statement. At the December meeting, three of the bank’s policymakers favored a 25 basis point rate hike, and the rate statement pointed to the potential need for further policy tightening. However, recent data showing that inflation is falling short of the Bank of England’s forecasts and wage growth is on a downward trajectory suggests that the central bank’s next move will be to reduce borrowing costs. Thus, if the MPC abandons its hawkish course for a longer rate hike, the market may react with a sell-off in the British currency.

Trading recommendations

• Support levels: 1.2638,1.2611,1.2572,1.2548,1.2499
• Resistance levels: 1.2728,1.2764,1.2827,1.2881,1.2937.

From the point of view of technical analysis, the trend on the GBP/USD currency pair on the hourly time frame is bearish. The pound sterling tested liquidity above 1.2728 yesterday, after which sellers showed a reverse initiative. Now the price has re-established itself below the moving averages, intraday selling is prevalent. Selling can be sought intraday up to the support level of 1.2638, below which a lot of liquidity has gathered. There are no optimal entry points for buying right now.

Alternative scenario:

if the price breaks the resistance level at 1.2764 and consolidates above it, the uptrend will likely resume.

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 147.56
• Prev. Close: 146.91
• % chg. over the last day: -0.44%

The yen rose to a 2-week high against the dollar on Wednesday. The yen found support on Wednesday thanks to the summary of the Bank of Japan’s January 22-23 policy meeting, which showed that policymakers are getting closer to raising interest rates. The yen then retreated from its best levels after hawkish comments from Fed Chair Powell strengthened the dollar. Swaps estimate the odds of a 10 bps rate hike from the BoJ at 24% at the next meeting on March 19 and 80% at the next meeting on April 26.

Trading recommendations

• Support levels: 146.39,145.64,144.33,143.41,142.18
• Resistance levels: 147.45,148.74,148.41,148.81,149.33.

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bullish despite the strong decline in price. Yesterday, sellers unexpectedly took the initiative and regained their priority intraday. The price tested below 146.39 and then consolidated back above the level. The repeated decline below 146.39 will lead to the quotes falling to 145.64. But the probability of growth up to 147.45 is higher. Therefore, buy deals can be considered intraday but with a limited stop-loss.

Alternative scenario:

if the price consolidates below the support at 144.92, the downtrend will likely resume.

The XAU/USD currency pair (gold)

Technical indicators of the currency pair:

• Prev. Open: 2036
• Prev. Close: 2035
• % chg. over the last day: -0.05%

Gold initially rose yesterday as economic reports from the US and Eurozone increased the chances of interest rate cuts from the Fed and ECB. Geopolitical risks remain in the Middle East, which also boosted demand for precious metals. But then gold prices fell by more than $12 an ounce in a late trading session after Fed Chairman Powell said he did not believe the FOMC would cut interest rates in March. From an economist’s perspective, the outlook for gold remains bullish in the medium term.

Trading recommendations

• Support levels: 2028,2019,1997,1987,1973
• Resistance levels: 2049,2064,2072,2084,2090.

From the point of view of technical analysis, the trend on the XAU/USD has changed to a downtrend. The price failed to consolidate above the priority change level. After testing above 2049, the price declined sharply. Today, in the Asian session, gold makes a new attempt to break above, and here, we need to watch the price reaction. A breakout and consolidation above 2049 will change the bias on this time frame to a bullish one, and buy trades will have to be favored. If the sellers react again now, there is a possibility of a decline to 2028.

Alternative scenario:

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