The EUR/USD currency pair

• Prev Open: 1.0212
• Prev Close: 1.0297
• % chg. over the last day: +0.83%

The EUR showed the largest one-day gain against the USD in the last five months. The euro’s strengthening came at the expense of the US Dollar Index as the US inflation data showed a slowdown in growth, raising expectations for a less aggressive rate hike cycle from the Fed. Now the most likely scenario at the US Federal Reserve’s September meeting will be a move to raise rates by 50 bps rather than the 75 bps previously forecast. But some analysts believe the market reaction was an overreaction as the cycle of rate hikes continues, and the Fed will begin reducing its balance sheet by $95 billion a month starting in September.

• Support levels: 1.0286, 1.0247, 1.0146, 1.0112, 1.0035, 1.0000
• Resistance levels: 1.0317, 1.0365, 1.0415, 1.050

Yesterday the price sharply jumped on the inflation data and consolidated above the balance. Under such market conditions, it is best to look for buy trades on intraday time frames from the support level of 1.0247, but with confirmation. Sell trades can be considered from the resistance level of 1.0317, only after additional confirmation and with short targets.

Alternative scenario: if the price breaks down through the 1.0146 support level and fixes below, the downtrend will likely resume.

• – US Producer Price Index (m/m) at 15:30 (GMT+3);
• – US Initial Jobless Claims (w/w) at 15:30 (GMT+3).

The GBP/USD currency pair

• Prev Open: 1.2070
• Prev Close: 1.2214
• % chg. over the last day: +1.19%

The representative of the Bank of England said yesterday that investors should not expect the return of quantitative easing in the next few years at least. The sentiment of politicians speaks for itself – the UK is preparing for a recession. Even though the Bank of England was one of the first central banks to begin the cycle of raising interest rates, the steps of the increase were too slow, analysts say. As a result, inflation in the country has not yet peaked, and the tightening cycle will stretch over time.

• Support levels: 1.2130, 1.2063, 1.2000
• Resistance levels: 1.2240, 1.2294

From the technical point of view, the trend on the currency pair GBP/USD on the hour timeframe is still upward, but now the price has deviated strongly from the average, we should wait for a pullback. The MACD indicator has turned positive. At the moment, it is best to look for buy trades on intraday time frames from the support level of 1.2130, but only with confirmation. Sell trades can be considered from the resistance level of 1.2240, but only after additional confirmation and with short targets.

Alternative scenario: if the price breaks down through the 1.2063 support level and fixes below, the downtrend will likely resume.

The USD/JPY currency pair

• Prev Open: 135.04
• Prev Close: 132.86
• % chg. over the last day: -1.64%

The dollar fell on Wednesday, showing the biggest decline against the yen since March 2020 after US inflation data. However, do not take this fall as a start of the Japanese currency. Fundamentally, the US Federal Reserve is tightening monetary policy by raising interest rates, while the Bank of Japan has a soft monetary policy, and no changes are planned before the end of the year. So, a huge difference in interest rates (+2.5% vs. -0.1%) will encourage USD/JPY quotes to grow in the mid-term.

• Support levels: 132.51, 131.08, 130.85
• Resistance levels: 134.36, 135.55, 136.02, 137.13

From the technical point of view, the medium-term trend on the currency pair USD/JPY is still bullish. The price has formed an accumulation zone above the 134.36 level, so a test of this zone is very likely. Under such market conditions, buy trades can be sought from the support level of 132.51, but with additional confirmation. For sell deals, it is possible to consider the level of resistance 134.36, but only with additional confirmation in the form of a reverse initiative, as fundamentally, USD/JPY quotes are inclined to grow.

Alternative scenario: If the price fixes above 135.55, the uptrend will likely resume.

The USD/CAD currency pair

• Prev Open: 1.2887
• Prev Close: 1.2775
• % chg. over the last day: -0.87%

The slowdown in US inflation reduces the likelihood of a 75 basis point interest rate hike by the Bank of Canada next month. Swap markets suggest there is about a 45% chance that Bank of Canada officials will raise borrowing costs by three-quarters of a percentage point in their September 7 decision. Next week, Canada will release inflation data for July. If inflation slows or stays the same, Tiff Macklem and his officials may opt for a smaller rate hike. Last week, though, a senior strategist at Toronto-Dominion Bank indicated that the Bank of Canada is likely to raise rates another 0.75% before starting to lower the rate hike.

• Support levels: 1.2766, 1.2701
• Resistance levels: 1.2817, 1.2871, 1.2918, 1.2965

In terms of technical analysis, the USD/CAD currency pair trend has changed to bearish. The price has consolidated below the priority change level. The MACD indicator has become negative, and the sellers’ pressure is still present. Under such market conditions, buy trades should be considered on the lower time frames from the support level 1.2766, but only with confirmation and short targets. For sell deals, it is better to consider the resistance level 1.2817 or 1.2871, but with confirmation.

Alternative scenario: if the price breaks out and consolidates above the 1.2918 resistance level, the uptrend will likely resume.