The Analytical Overview of the Main Currency Pairs on 2022.08.18

The EUR/USD currency pair

• Prev Open: 1.0165
• Prev Close: 1.0177
• % chg. over the last day: +0.12%

The FOMC meeting for July showed that Fed officials are concerned the US Central Bank may raise rates too much as part of its commitment to control inflation. Some Fed participants noted that interest-rate-sensitive sectors were starting to show signs of slowing and that some felt there was a risk of over-tightening. The dollar index fell slightly after the FOMC protocol was released, giving temporary confidence to the European currency. Eurozone GDP grew by 0.6% in the second quarter of 2022 on a seasonally adjusted basis as forecasted, but analysts believe this is the last quarterly growth this year as the Eurozone economy slides into recession.

• Support levels: 1.0136, 1.0112, 1.0035, 1.0000
• Resistance levels: 1.0185, 1.0230, 1.0286, 1.0365, 1.0415, 1.050

From the technical point of view, the trend on the EUR/USD currency pair on the hourly time frame is bearish. The price is now trading in a narrow range. At the same time, resistance level 1.0185 has been tested more than four times, but the price failed to consolidate higher. Under such market conditions, it is best to look for buy trades on the intraday time frames from the support level of 1.0136, but with a confirmation in the form of a reverse initiative. Sell trades can be considered from resistance levels of 1.0230, but only after the additional confirmation.

Alternative scenario: if the price breaks out of the 1.0286 resistance level and fixes above, the uptrend will likely resume.

• – Eurozone Consumer Price Index (m/m) at 12:00 (GMT+3);
• – US Initial Jobless Claims (w/w) at 15:30 (GMT+3);
• – US Philadelphia Fed Manufacturing Index (m/m) at 15:30 (GMT+3);
• – US Existing Home Sales (m/m) at 17:00 (GMT+3);
• – US FOMC Member George Speaks (m/m) at 20:20 (GMT+3).

The GBP/USD currency pair

• Prev Open: 1.2079
• Prev Close: 1.2048
• % chg. over the last day: -0.26%

The UK Consumer Price Index rose to 10.1% in annual terms (forecast at 9.8%) in July, the highest level in 40 years. The largest upward contributions to the annual inflation rate in July 2022 came from household services (mainly due to higher prices for electricity, gas, and other fuels) and food. The Core Consumer Price Index (excluding energy and food) rose to an annualized 6.2%, up from 5.8% in June. The Bank of England warned that inflation would increase through October, with a projected peak near 13%.

• Support levels: 1.2028, 1.2000
• Resistance levels: 1.2167, 1.2215, 1.2294

From the technical point of view, the trend on the GBP/USD currency pair on the hourly time frame is bearish. The price is now trading below the moving averages, indicating some selling pressure. The MACD indicator becomes negative. It is best to look for sell trades from the resistance level of 1.2167, but only after the additional confirmation. Buy trades can be considered on intraday time frames from the support level of 1.2028, but only with confirmation.

Alternative scenario: if the price breaks out through the 1.2215 resistance level and fixes above, the uptrend will likely resume.

The USD/JPY currency pair

• Prev Open: 134.17
• Prev Close: 135.07
• % chg. over the last day: +0.67%

Several Fed policymakers have discussed the need for further rate hikes in the last few days, so the USD/JPY quotes are rising again. Fundamentally, there are no changes in monetary policy in either country at the moment. The US Fed continues the cycle of interest rate hikes, while the Bank of Japan has a soft monetary policy, which negatively affects the national exchange rate. Japan’s trade deficit reached an all-time high in July as a surge in commodity prices and a 24-year low in the yen exacerbated obstacles to the country’s economic recovery.

• Support levels: 134.23, 133.47, 132.27, 131.08, 130.85
• Resistance levels: 135.29, 136.02, 137.12

From the technical point of view, the medium-term trend on the currency pair USD/JPY is still bullish. USD/JPY quotes continue to grow steadily, breaking through all the resistance levels. Under such market conditions, buy trades can be sought from the support level of 134.23, but with additional confirmation. For sell deals, it is possible to consider the resistance level of 135.29, 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 132.29, the downtrend will likely resume.

The USD/CAD currency pair

• Prev Open: 1.2848
• Prev Close: 1.2914
• % chg. over the last day: +0.51%

The Canadian dollar is a commodity currency, so it depends not only on the monetary policy of the Central Bank of Canada but also on the dollar index and oil prices. Oil prices were trading flat yesterday, and the dollar index was getting stronger before the FOMC minutes publication. As a result, before the FOMC news, the USD/CAD quotes grew due to the strengthening of the US dollar. It should be noted that the interest rates of the US and Canadian central banks are now at the same level, and the next step up is also planned at 50 bps for both banks. As a result, there is a certain parity between the currencies, and only the oil prices will introduce some imbalance.

• Support levels: 1.2858, 1.2809, 1.2761
• Resistance levels: 1.2926, 1.2965

From the point of view of technical analysis, the trend on the USD/CAD currency pair is bullish. The MACD indicator has become positive, and the buyer’s pressure is still present, but the price is trading in front of the resistance level. Under such market conditions, buy trades should be considered on the lower time frames from the support level of 1.2858, but only with confirmation. For sell deals, it is better to consider the resistance level 1.2965, but also with confirmation.

Alternative scenario: if the price breaks down and consolidates below the 1.2809 support level, the downtrend will likely resume.