The Analytical Overview of the Main Currency Pairs on 2024.02.06

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0785
• Prev. Close: 1.0742
• % chg. over the last day: -0.43%

The hawkish comments from the Fed on Monday further limited expectations of a Fed rate cut and boosted the dollar. The dollar also added to gains on the back of a stronger-than-expected January ISM Services Business Activity Index, which pushed 10-year T-note yields to a 1-week high. In addition, the weaker-than-expected Eurozone PPI report was dovish for ECB policy and bearish for the Euro. Currently, the probability of an ECB rate cut in March is 68%, while the probability of a Fed rate cut in March is 16%. It is due to the strength of the US economy that there was a reassessment of probabilities in favor of the dollar, which puts pressure on the euro.

Trading recommendations

• Support levels: 1.0772,1.0721,1.0724
• Resistance levels: 1.0755,1.0816,1.0860,1.0885,1.0931,1.0985,1.1010

The trend on the EUR/USD currency pair on the hourly time frame is a downtrend. The price declined to the support level of 1.0721, where the buyers showed moderate initiative. Now, it is too late to buy as the price has approached the resistance level. Selling can be considered after testing liquidity above 1.0755 and going back below the level. In case of a breakout of 1.0755, the road to 1.0790 will open.

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: 1.2621
• Prev. Close: 1.2521
• % chg. over the last day: -0.87%

The pace of UK retail sales growth slowed at the beginning of the year, another sign of weakening economic demand. Total sales rose by 1.2% in January, compared to the three-month average of 1.9%. Lower inflation and weak consumer demand led to a slowdown in retail sales growth, which is a negative factor for the British currency.

Trading recommendations

• Support levels: 1.2608,1.2572,1.2548,1.2499
• Resistance levels: 1.2561,1.2643,1.2674,1.2750,1.2827,1.2881,1.2937

From the point of view of technical analysis, the trend on the GBP/USD currency pair on the hourly time frame is bearish. Similar to the Eurodollar, the price also continued its decline yesterday and is now in the demand zone of the higher time frame. The price is now approaching the resistance level. There are no optimal entry points for buying now. Selling can be considered after a liquidity test above 1.2561, followed by a seller’s reaction.

Alternative scenario:

if the price breaks the resistance level at 1.2750 and consolidates above it, the uptrend will likely resume.

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 148.37
• Prev. Close: 148.66
• % chg. over the last day: +0.19%

The yen extended last Friday’s losses on Monday and hit a 2-month low against the dollar. Hawkish comments from Fed Chair Powell and Minneapolis Fed President Kashkari on Monday pushed T-note bond yields up and pressured the yen. But the yen found some support after Jibun Bank’s services PMI for January was revised upward to a 4-month high. Swaps put the odds of a 10 bps BoJ rate hike at 20% at the next meeting on March 19 and 81% at the April 26 meeting.

Trading recommendations

• Support levels: 148.19,147.67,148.81,145.87
• Resistance levels: 148.81,149.33

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bullish. The price has reached the 148.81 resistance level, where the sellers showed some activity. Everything goes to the fact that after a small pullback, the price will continue the upward movement. Optimal levels for buying are 148.19 and 147.67, but with confirmation. Selling can be considered intraday, but only with short targets.

Alternative scenario:

if the price consolidates below the support at 145.87, the downtrend will likely resume.

The XAU/USD currency pair (gold)

Technical indicators of the currency pair:

• Prev. Open: 2040
• Prev. Close: 2025
• % chg. over the last day: -0.74%

The rally of the dollar index on Monday to a 2-month high played into the hands of metal prices as gold fell to a 1-week low. Gold is still under pressure from the continued liquidation of long positions by funds after the volume of long positions in gold ETFs fell to a 4-year low last Friday. At the same time, in the medium term, gold still has all the prerequisites for growth because as soon as central banks start to cut rates, the yields on government bonds will start to fall, which will lead to an increase in prices for precious metals.

Trading recommendations

• Support levels: 2031,2019,1997,1987,1973
• Resistance levels: 2042,2062,2069,2084,2090

From the point of view of technical analysis, the trend on the XAU/USD is again downward. Buyers failed to keep the price above 2029. The price has consolidated below, and all the conditions are for further decline. Selling can be considered from 2031 with a target of 2020. If the price closes above 2031 and consolidates, the buyers may temporarily take the initiative to 2041.

Alternative scenario:

if the price breaks above the resistance level of 2057, the uptrend will likely resume.