The Analytical Overview of the Main Currency Pairs on 2022.08.15

The EUR/USD currency pair

• Prev Open: 1.0315
• Prev Close: 1.0258
• % chg. over the last day: -0.56%

Eurozone industrial production rose by 0.7%, well below May’s 2.1%. Europe is digging deeper into the energy crisis, and the high inflation rate only adds to the already huge number of problems. In France, inflation rose to an annualized 6.8%, while in Spain, consumer prices reached 10.8% (y/y), the highest level since 1984. The European currency will be under pressure in the coming weeks as the interest rate differential (US Federal Reserve – 2.5%, ECB – 0.5%) favors EURUSD quotes’ decline. Commerzbank has revised its forecast for the euro-dollar as it expects a recession in the Eurozone as a base case scenario.

• Support levels: 1.0247, 1.0201, 1.0112, 1.0035, 1.0000
• Resistance levels: 1.0286, 1.0317, 1.0365, 1.0415, 1.050

From a technical point of view, the trend on the EUR/USD currency pair on the hourly time frame is bullish. But the price is again back in a wide range, forming a false breakout zone above. Under such market conditions, buy trades are best sought on intraday time frames from the support level of 1.0201, but with confirmation. Sell trades can be considered from the resistance level of 1.0286, but only after additional confirmation.

Alternative scenario: if the price breaks down through the 1.0201 support level and fixes below, the downtrend will likely resume.

• – US NY Empire State Manufacturing Index (m/m) at 15:30 (GMT+3).

The GBP/USD currency pair

• Prev Open: 1.2196
• Prev Close: 1.2133
• % chg. over the last day: -0.52%

UK GDP declined by 0.1% over the last quarter, with the biggest drop in economic indicators seen in the last month. Industrial production fell by 0.9%, and manufacturing output fell by 1.6% for the month. In the NIESR Summer UK Economic Outlook, analysts point out that the UK economy is likely to enter recession in the third quarter of 2022 and remain in it until the first quarter of 2023, with an annualized GDP growth forecast of 3.5% in 2022 and just 0.5% in 2023. According to the latest Reuters poll of economists, the Bank of England remains on track for a 50 basis point rate hike in September before returning to a more regular 25 bps hike in November.

• Support levels: 1.2103, 1.2063, 1.2000
• Resistance levels: 1.2167, 1.2294

From the technical point of view, the currency pair GBP/USD trend on the hourly time frame is still upward. The price has corrected to the levels of the moving averages, where a small balance is forming. A price move below 1.2103 would increase the probability of a trend change. The MACD indicator became negative, and sellers’ pressure remains. At the moment, it is best to look for buy trades on intraday time frames from the support level of 1.2103, but only with confirmation. Sell trades can be considered from the resistance level of 1.2167, 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: 132.99
• Prev Close: 133.48
• % chg. over the last day: +0.37%

On Friday, the Japanese yen fell against the recovering US dollar. This followed statements from a group of Federal Reserve officials warning investors against optimism after a slight easing in inflation last week. Currently, there is no fundamental reason for the Japanese yen to strengthen, as the Central Bank of Japan is maintaining a soft monetary policy while the US Federal Reserve is raising interest rates. The difference in the interest rates (Fed -2.5%, BoJ -0.10%) favors further growth of USD/JPY quotes.

• Support levels: 132.27, 131.08, 130.85
• Resistance levels: 134.36, 136.02, 137.12

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 132.27, 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 below 131.37, the downtrend will likely resume.

• – Japan GDP (q/q) at 02:50 (GMT+3);
• – Japan Industrial Production (m/m) at 07:30 (GMT+3).

The USD/CAD currency pair

• Prev Open: 1.2761
• Prev Close: 1.2773
• % chg. over the last day: +0.09%

Canadian 10-year government bond yields fell about 50 basis points below 2-year yields. This is the largest inversion of Canada’s yield curve since 1994 and deeper than the inversion of the US Treasury bond yield curve. The inverted yield curve for Canadian government bonds signals that the Bank of Canada may raise interest rates to levels that would cause a recession. And the biggest concern for investors is the housing market. The Bank of Canada’s interest rate is expected to rise to a peak of about 3.50% in the coming months.

• Support levels: 1.2761, 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 level of priority change and below the moving averages. But now, the price is growing in the background of the stronger dollar and the decline in oil prices. The MACD indicator has become positive, with a slight buying pressure. Under such market conditions, buy trades should be considered on the lower time frames from the support level of 1.2761, but only with confirmation and short targets. For sell deals, it is better to consider the resistance level of 1.2817 or 1.2871, but with confirmation.

Alternative scenario: if the price breaks out and consolidates above the 1.2871 resistance level, the uptrend will likely resume.

• – Canada Wholesale Sales (m/m) at 15:30 (GMT+3).