The Analytical Overview of the Main Currency Pairs on 2024.08.05

The EUR/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.0787
• Prev. Close: 1.0911
• % chg. over the last day: +1.15%

The euro rose by about 1% and approached $1.09 on Friday, benefiting from the general weakening of the dollar, amid concerns about the strength of the US economy after a disappointing jobs report. That has led to speculation that the Fed may have to cut interest rates not twice but three times this year. Meanwhile, traders continue to believe that the ECB will cut rates at least two more times this year, with the next cut likely to come in September. Markets rate the odds of a 25bp rate cut at the September 18 FOMC meeting at 100% and a 50bp rate cut at 70%. Meanwhile, swaps rate the odds of a 25bp ECB rate cut at the September 12 meeting at 100%.

Trading recommendations

• Support levels: 1.0884,1.0841,1.0816
• Resistance levels: 1.0935,1.0953,1.0986

The trend on the EUR/USD currency pair in the hourly time frame has changed to an upward trend. One day was enough to reverse the medium-term trend on the euro. The price has confidently consolidated above the level of priority change. Now, it is worth waiting for a technical correction before looking for buy trades. The most optimal support levels are 1.0884 and 1.0841. There are no optimal entry points for selling now.

Alternative scenario:

if the price breaks through the support level of 1.0786 and consolidates below it, the downtrend will likely resume.

The GBP/USD currency pair

Technical indicators of the currency pair:

• Prev. Open: 1.2733
• Prev. Close: 1.2806
• % chg. over the last day: +0.57%

Bank of England Chief Economist Huw Pill warned against further interest rate cuts in the near term, saying that efforts to curb inflation are not over and there is evidence that companies continue to raise prices. The official, who sits on the nine-member Monetary Policy Committee, voted against cutting the key lending rate by a quarter point to 5%. The chief economist’s dissent put him in opposition to Governor Andrew Bailey, who cast the deciding vote in favor of a rate cut at the meeting. Policymakers will consider two more batches of inflation data before their next meeting on September 19. The UK’s Core Consumer Price Index has been above the 2% target for two consecutive months, but services inflation remains higher than expected.

Trading recommendations

• Support levels: 1.2717,1.2694,1.2662
• Resistance levels: 1.2840,1.2879,1.2909,1.2950

From the point of view of technical analysis, the trend on the GBP/USD currency pair is bearish. Unlike the euro, the Brit failed to consolidate above the priority level of 1.2840. Sellers protected their positions. Now, the price is retesting the support level of 1.2717, and most likely, this time, the level will not hold. For buying, it is worth considering the support levels of 1.2717 or 1.2694, but with confirmation. There are no optimal entry points for selling right now.

Alternative scenario:

if the price breaks through the resistance level at 1.2840 and consolidates above it, the uptrend will likely resume.

The USD/JPY currency pair

Technical indicators of the currency pair:

• Prev. Open: 149.32
• Prev. Close: 146.50
• % chg. over the last day: -1.92%

The Japanese yen strengthened to 142 per USD, reaching its highest levels since early January on expectations that the Bank of Japan will continue to raise interest rates in the coming months, while the US Federal Reserve is likely to cut rates more aggressively. These expectations came after a weak employment report heightened fears of a US recession, prompting markets to assume a larger Fed rate cut of 50 basis points in September.

Trading recommendations

• Support levels: 142.80,140.22,137.26
• Resistance levels: 148.13,150.27,151.26

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bearish. The price continues to fall without noticing the support levels. But now, the price has reached the daily support level, where sellers are likely to partially close, leading to a technical correction. The bias remains with the sellers. Buying from 142.80 should be considered only with a short take profit and stop loss. There are no optimal entry points for selling now, as the price has deviated strongly from the moving averages.

Alternative scenario:

if the price breaks through and consolidates above the resistance level of 150.88, the uptrend will likely resume.

The XAU/USD currency pair (gold)

Technical indicators of the currency pair:

• Prev. Open: 2443
• Prev. Close: 2442
• % chg. over the last day: -0.04%

Gold traded above $2,450 an ounce on Monday, nearing record highs amid concerns about a US recession and heightened expectations of a dovish Federal Reserve policy after weak US economic data. On Friday, data showed that the US economy added 114,000 jobs in July, which was below market expectations of a 175,000 increase. In addition, the unemployment rate unexpectedly rose to its highest level since 2021, and wage growth slowed more than expected. This followed weak manufacturing data, with the ISM manufacturing PMI showing a larger-than-expected contraction in factory activity. The markets now believe that the probability of the Fed cutting the Fed Funds rate by 50 basis points in September is more than 70%, and the total amount of easing this year and next year will be about 155 basis points.

Trading recommendations

• Support levels: 2414,2400,2384,2370
• Resistance levels: 2351,2471,2500

From the point of view of technical analysis, the trend on the XAU/USD is bullish. The price has reached the resistance level of 2471. This level has been tested earlier, but sellers remain strong here. Now, the price has been corrected to the 2414 support level, where the buyers have put their wall in place and do not let the price go lower. The bulls remain bullish, so it is best to look for buying from 2414 or 2400. Selling can be sought intraday to these levels but with short stop losses.

Alternative scenario:

if the price breaks and consolidates below the support level of 2384, the downtrend will likely resume.