By JustMarkets
The euro gained about 1.4% against the US dollar last week, the best week since late May. On Friday, San Francisco Federal Reserve President Mary Daly said it was time to start talking about slowing borrowing costs and that the Fed should be less aggressive in its rate hike cycle. So the next rate hike is being considered at 0.5%. The statement came as a surprise to analysts as all previous statements of the Fed representatives were only aimed at an aggressive rate hike cycle with the next step at 0.75%. Because the ECB is planning to raise the rate by 0.75% this week, a reduction in the interest rate differential between the US Fed and the ECB might give confidence to the European currency.
From the technical point of view, the trend on the EUR/USD currency pair on the hourly time frame is bullish. The price is trading above the moving averages. The MACD indicator became positive, and the buyers’ pressure is prevailing again. Buy trades should be considered from the support level of 0.9817 or 0.9755, but with additional confirmation in the form of reverse initiative. Sell deals may be considered from the resistance level of 0.9961, but also with confirmation.
Alternative scenario: if the price breaks down through the support level of 0.9700 and fixes below it, the downtrend will likely resume.
This week the Conservative Party of Great Britain must choose a new leader to become the fifth Prime Minister in Great Britain in the last six years. Boris Johnson has announced that he will not run for the Conservative Party leader and UK prime minister position. Thus, former finance minister Rishi Sunak is the front-runner for the prime minister. The next prime minister will inherit an economy on the road to a recession, with rising interest rates and inflation of more than 10%, leaving millions of people facing a cost-of-living crisis. Chancellor Jeremy Hunt, who is expected to remain in office under the new prime minister, said Friday that he would do “whatever is necessary” to reduce the national debt ahead of his new budget, to be announced on October 31.
From the technical point of view, the GBP/USD currency pair trend on the hourly time frame is bullish. But the price is trading below the moving averages. The price is trading below the moving averages again. The MACD indicator has become positive, and buyers’ pressure prevails. Under such market conditions, buy trades can be considered from the support level of 1.1172, but better after confirmation. Sell trades are best to look for on intraday time frames, the nearest resistance level is 1.1369.
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Alternative scenario: if the price breaks down of the 1.1093 support level and fixes below it, the downtrend will likely resume.
On Friday, the Japanese Ministry of Finance carried out another intervention to protect the yen from falling further. The background to this price movement is the continued monetary policy divergence between the Bank of Japan and the US Federal Reserve. The Japanese government is expected to announce a stimulus package by the end of this month. The weak yen exacerbates household problems by raising the expensive food and fuel costs. The Bank of Japan will also meet on monetary policy and interest rates this week. But analysts do not expect any changes and believe that the Bank of Japan will maintain its current loose monetary policy, which will continue to put pressure on the yen.
From the technical point of view, the medium-term trend on the currency pair USD/JPY is bullish despite the currency intervention. The price is trading below the moving levels. The MACD indicator is in the negative zone, but the buyers’ pressure remains. Under such market conditions, buy trades can be sought on intraday time frames from the support level of 146.63, but with confirmation. Sell deals can be searched from the resistance level of 150.00 or 151.05, but only with additional confirmation in the form of a reverse initiative.
Alternative scenario: If the price fixes below 145.88, the downtrend will likely resume.
The Bank of Canada will hold its monetary policy and interest rate meeting this week. The Bank of Canada is expected to raise its benchmark interest rate by 50 basis points, although a move from 75 bps is possible as core inflation in Canada shows no signs of slowing. Also, keep in mind that the Canadian dollar is a commodity currency, so it is also highly exposed to oil price fluctuations. The medium-term oil outlook points to growth, so amid a decline in the dollar index, the Canadian currency can at least take over the initiative.
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. The MACD indicator has become negative, but the sellers’ pressure is weak. Under such market conditions, buy trades should be considered on the lower time frames from the support level of 1.3638 but better after confirmation. For sell deals, it is best to consider the resistance level of 1.3795, but only after additional confirmation in the form of a reverse initiative.
Alternative scenario: if the price breaks down and consolidates below the support level of 1.3619, the downtrend will likely resume.
By JustMarkets
This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.
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