The Analytical Overview of the Main Currency Pairs on 2022.12.16

The EUR/USD currency pair

• Prev Open: 1.0680
• Prev Close: 1.0626
• % chg. over the last day: -0.50 %

The European Central Bank (ECB) raised its interest rate by another 50 basis points (bps) at its December meeting, bringing its discount rate to the upper limit of most estimates of a neutral configuration for the eurozone, at 2%. The ECB’s new macroeconomic forecasts predict inflation above the ECB’s price stability definition for the entire three-year forecast horizon. The peak discount rate is forecast at 3.25%. Eurozone’s inflation data will be released today. Analysts forecast that consumer prices will remain unchanged.

• Support levels: 1.0580, 1.0549, 1.0483, 1.0361, 1.0332, 1.0284, 1.0193
• Resistance levels: 1.0695

The trend on the EUR/USD currency pair on the hourly time frame is bullish. The price is trading above the moving averages. The price is trading above the moving averages, but there is selling pressure on the lower time frames. The MACD indicator has become inactive. Under such market conditions, buy trades are best considered from the support level of 1.0580 or 1.0549, but with additional confirmation. Sell deals can be considered from the resistance level of 1.0695, but it is better with a confirmation in the form of a reverse initiative or a false breakout because 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.

• – French Manufacturing PMI (m/m) at 10:15 (GMT+2);
• – German Manufacturing PMI (m/m) at 10:30 (GMT+2);
• – Eurozone Manufacturing PMI (m/m) at 11:00 (GMT+2);
• – Italian Consumer Price Index (m/m) at 12:00 (GMT+2);
• – Eurozone Consumer Price Index (m/m) at 12:00 (GMT+2);
• – US Manufacturing PMI (m/m) at 16:45 (GMT+2).

The GBP/USD currency pair

• Prev Open: 1.2414
• Prev Close: 1.2177
• % chg. over the last day: -1.95 %

Yesterday the Bank of England raised its interest rate by 0.5% as expected, but it did not help the British currency to keep the fall, as dollar index growth provoked a sell-off in major currency pairs. The Bank of England said that further rate hikes might be needed to meet the bank’s goal of 2%. Investors expect the Bank of England to raise its key rate to 4.5% by the middle of next year, which implies two more hikes of 0.5% each.

• Support levels: 1.2177, 1.2024, 1.1964, 1.1684, 1.1476, 1.1418
• Resistance levels: 1.2308, 1.2431, 1.2519

From the technical point of view, the trend on the GBP/USD currency pair on the hourly time frame is bullish. But the price is trading below the moving averages, and selling prevails inside the day. The MACD indicator is in the negative zone. 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 sought from the resistance level of 1.2308, but also better with confirmation.

Alternative scenario: if the price breaks down of the 1.2100 support level and fixes below it, the downtrend will likely resume.

• – UK Retail Sales (m/m) at 09:00 (GMT+2);
• – UK Manufacturing PMI (m/m) at 11:30 (GMT+2).

The USD/JPY currency pair

• Prev Open: 135.43
• Prev Close: 137.78
• % chg. over the last day: +1.73 %

Japan’s manufacturing PMI fell to 48.8 in December from 49.0 in the previous month. For the second month, the index is below the 50 mark, which separates contraction from growth. Meanwhile, service sector activity rose due to a rebound in tourism. The Services Business Activity Index (PMI) rose to a seasonally adjusted 51.7 in December, up from 50.3 in the previous month. The Japanese yen is still under pressure as the Bank of Japan firmly sticks to its soft monetary policy.

• Support levels: 137.18, 135.61
• Resistance levels: 139.09, 140.75, 143.17, 145.16

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bearish, but the probability of trend change is increasing as the price has consolidated above the moving averages, and the MACD indicator shows buying pressure. Sell deals can be sought from the resistance level of 139.09, provided that there is a reverse reaction. Buy trades are best considered on intraday time frames from the support level of 137.18, but only with confirmation, as the level is quite high relative to the growth wave.

Alternative scenario: If the price fixes above 139.00, the uptrend will likely resume.

The USD/CAD currency pair

• Prev Open: 1.3544
• Prev Close: 1.3655
• % chg. over the last day: +0.82 %

The Canadian dollar lost some ground yesterday due to the rise in the dollar index and the decline in oil prices. In the medium term, the Canadian dollar has strong fundamental support from the Bank of Canada as the BoC holds one of the highest interest rates, on par with the US Federal Reserve. Therefore, only oil prices will have the greatest impact on the USD/CAD quotes.

• Support levels: 1.3601, 1.3521, 1.3438, 1.3386, 1.3360, 1.3281, 1.3212
• Resistance levels: 1.3690, 1.3776, 1.3855

From the point of view of technical analysis, the trend on the USD/CAD currency pair has changed to bullish. The price is trading above the moving averages, and the MACD indicator is positive again. Buy trades should be considered from the support level of 1.3601, but with additional confirmation. For sell deals, it is best to consider the resistance level of 1.3690, but with confirmation in the form of a reverse initiative or after a false breakout, since 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.