By JustMarkets
The US consumer price data will be released today, and an important interest rate meeting of the Federal Reserve will be held tomorrow. Analysts forecast that the consumer inflation rate will fall from 7.7% to 7.4% year-over-year, and core inflation (which excludes food and energy prices) will fall from 6.3% to 6.1%. Amid the slowdown in rate hikes, investors will turn their attention to riskier assets such as the euro. Also, on Tuesday, Germany will publish inflation data where inflationary pressures are also expected to decrease. Thus, volatility in currency pairs with the US dollar and euro will be extremely high.
The trend on the EUR/USD currency pair on the hourly time frame is bullish. But at the moment, the price is forming a wide-volatile flat. The MACD indicator has become inactive. Under such market conditions, moving to lower time frames or waiting for an impulse movement is necessary. Buy trades are best considered from the support level of 1.0483, but with additional confirmation. Sell deals can be considered from the resistance level of 1.0584, but it is better with a confirmation in the form of a reverse initiative or a false breakout, as the level has already been tested.
Alternative scenario: if the price breaks down through the support level of 1.0446 and fixes below it, the downtrend will likely resume.
The Bank of England and the UK Treasury have already acknowledged that the country is in recession. However, technically, there have not been two consecutive quarters of negative growth so far. There has only been one-quarter of negative growth. The latest GDP data showed that the UK economy grew by 0.5% in the last month. Since the last Bank of England meeting, the data have been consistent with the recession estimate but not as bad as expected. This creates a difficult scenario for the Bank of England as inflation is still in double digits, and therefore the Bank of England is likely to raise its rate by 0.5% this Thursday.
From the technical point of view, the GBP/USD currency pair trend on the hourly time frame is bullish. The price is trading at the level of the moving averages, but there are signs of liquidity narrowing. The MACD indicator has become inactive. Under such market conditions, buy trades are better to look for from the support level of 1.2177, but with confirmation on intraday time frames. Sell trades are best looked for from the resistance level of 1.2304 but also better with confirmation in the form of a reverse initiative or a false breakout.
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Alternative scenario: if the price breaks down from the 1.2100 support level and fixes below it, the downtrend will likely resume.
The situation on the USD/JPY currency pair has not changed. Fundamentally, in the medium term, USD/JPY quotes are inclined to grow as the difference between the interest rates of the US Federal Reserve and the Bank of Japan is increasing. On Wednesday, the Fed will raise the rate by at least another 0.5%, while the Bank of Japan is firmly committed to a soft monetary policy until spring 2023. This divergent policy contributes to the decline of the Japanese currency against the dollar.
From the technical point of view, the medium-term trend on the currency pair USD/JPY is bearish. The MACD indicator is in the positive zone, and the buyer’s pressure on the intraday time frames is increasing, but there are the first signs of divergence. Sell deals can be looked for from the resistance level of 139.09 if there is a reverse reaction. Buy trades are best considered on intraday time frames from the support level of 137.13, but only with confirmation.
Alternative scenario: If the price fixes above 139.00, the uptrend will likely resume.
Oil prices jumped by 3% yesterday. Oil was supported by the continued closure of the pipeline that connects Canadian oil to the US Gulf Coast. How long it will take Canada’s TC Energy Corp to clean up and restart its Keystone pipeline is still unknown. The Canadian dollar is a commodity currency, so rising oil prices have strengthened the Canadian dollar. A decline in US inflation today may trigger a further rise in oil prices.
From the point of view of technical analysis, the trend on the USD/CAD currency pair has changed to bullish. The price is trading at the level of moving averages, and the MACD indicator has become inactive. Such market conditions significantly complicate the search for good entry points. Buy trades should be considered from the 1.3621 support level, but with additional confirmation. For sell deals, it is better to consider the resistance level of 1.3690 but with confirmation in the form of a reverse initiative or after a false breakout, as the level has already been tested.
Alternative scenario: if the price breaks down and consolidates below the support level of 1.3386, 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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