The Analytical Overview of the Main Currency Pairs on 2022.09.20

The EUR/USD currency pair

• Prev Open: 1.0007
• Prev Close: 1.0020
• % chg. over the last day: -0.13 %

The risk of recession in the Eurozone has reached its highest level since July 2020 as fears grow that winter energy shortages will cause economic activity to decline. Economists surveyed by Bloomberg now estimate the probability of two consecutive quarters of GDP contraction at 80% over the next 12 months, up from 60% in the previous survey. Germany, the bloc’s largest economy and one of the most exposed to shrinking gas supplies, is likely to contract as soon as this quarter. Inflation is now expected to peak at 9.6% in the next three months, nearly five times the European Central Bank’s target.

• Support levels: 0.9989, 0.9912
• Resistance levels: 1.0148, 1.0111, 1.0162, 1.0230

From the technical point of view, the trend on the EUR/USD currency pair on the hourly time frame is bullish. On Friday, the price formed a false breakdown area below the level of 0.9971, and then on Monday, tested this zone. The MACD indicator became positive, and there is a slight buying pressure. Buy trades may be considered from the 0.9989 level. It is better to look for sell deals from the resistance levels of 1.0111 or 1.0162.

Alternative scenario: if the price breaks down through the support level of 0.9912 and fixes below, the downtrend will likely resume.

• – US Building Permits (m/m) at 15:30 (GMT+3);
• – Eurozone ECB President Lagarde Speaks (m/m) at 20:00 (GMT+3).

The GBP/USD currency pair

• Prev Open: 1.1411
• Prev Close: 1.1415
• % chg. over the last day: +0.04 %

This week the Bank of England will consider whether to hold the largest interest rate hike in 33 years to respond to rising inflation and weakening confidence in British assets. With inflation, at five times the UK Central Bank’s goal of 2%, and the pound falling almost daily, policymakers led by Governor Andrew Bailey are forced to consider tightening monetary policy. The arguments for a 75 basis point hike are already more persuasive than those for a 50 basis point hike. But Prime Minister Liz Truss’ actions to protect households from rising energy bills will give a boost to the economy by softening the recession. So on the other hand, the government’s emergency energy support package reduces the need for an aggressive rate hike.

• Support levels: 1.1400
• Resistance levels: 1.1449, 1.1626, 1.1693, 1.1816, 1.1901, 1.1994, 1.2035, 1.2167

From the technical point of view, the trend on the GBP/USD currency pair on the hourly time frame has changed to bearish. At the moment, the price is trading at the level of moving averages, and the MACD indicator has become inactive. It is quite possible that the price is now forming a false-breakdown zone, which can be used as support if the price again consolidates above the level of 1.1449. Sell trades are better to consider in the intraday time frames, and the nearest resistance level is 1.1626.

Alternative scenario: if the price breaks out of the 1.1693 resistance level and fixes above it, the uptrend will likely resume.

The USD/JPY currency pair

• Prev Open: 142.88
• Prev Close: 143.20
• % chg. over the last day: +0.23 %

The nationwide Consumer Price Index rose to an annualized 2.8% (2.6% previously), the highest reading in 8 years. And while inflation remains above the 2% target, the Bank of Japan cannot be expected to abandon its ultra-soft monetary policy suddenly. Analysts predict that traders should not expect any changes in the Bank of Japan’s monetary policy before the year’s end. Therefore, considering that the US Fed keeps raising the interest rates, the gap between the rates continues to widen, which will put negative pressure on the yen.

• Support levels: 142.57, 141.77, 141.00, 139.61, 138.78, 137.65, 136.80, 135.20
• Resistance levels: 144.21, 145.00

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bullish. The price is trading at the level of the slips and forming a balance. The MACD indicator has become inactive. Under such market conditions, buy trades can be sought from the support level of 142.57, but with additional confirmation. Sell deals can be considered on intraday time frames from the resistance level of 144.21 or 145.00, but only with additional confirmation since, fundamentally, the USD/JPY is inclined to grow.

Alternative scenario: If the price fixes below 141.00, the downtrend will likely resume.

• – Japan National Core Consumer Price Index (m/m) at 02:30 (GMT+3);

The USD/CAD currency pair

• Prev Open: 1.3260
• Prev Close: 1.3250
• % chg. over the last day: -0.08 %

Canada will release Consumer Price Index data today. Canada’s inflation rate is expected to fall for the second month to 7.3% from 7.6% annualized. But the Bank of Canada focuses more on the Core Index, which excludes food and energy prices, and the situation there is much more complicated. The annual core CPI is expected to rise to 6.2% from 6.1%. Therefore, the Bank of Canada is likely to maintain its aggressive stance. On the other hand, a deviation from expectations will signal a continued downward trajectory for inflation. That could revive the discussion about the extent to which the Bank of Canada will hold back tightening at its next meeting. As for the Canadian dollar, its weakness is due to the expectation that the Bank of Canada will “reverse” first. But if core inflation continues to rise, the BOC will remain aggressive, and the USD/CAD uptrend could be interrupted. Of course, the situation can change if inflation shows a decrease, in which case the BOC can take a break from rate hikes.

• Support levels: 1.3220, 1.3053, 1.2990, 1.2958, 1.2936, 1.2900
• Resistance levels: 1.3303, 1.3326

From the point of view of technical analysis, the trend on the USD/CAD currency pair is bullish. The price is trading at the level of moving averages, and the MACD indicator has become inactive. Under such market conditions, buy trades should be considered on the lower time frames from the support level of 1.3220. The best way to sell is to consider the resistance level of 1.3303, but only after an additional confirmation in the form of a false breakdown.

Alternative scenario: if the price breaks down and consolidates below the 1.2990 support level, the downtrend will likely resume.

• – Canada Consumer Price Index (m/m) at 15:30 (GMT+3).