The Analytical Overview of the Main Currency Pairs on 2022.12.20

The EUR/USD currency pair

• Prev Open: 1.0585
• Prev Close: 1.0606
• % chg. over the last day: +0.19

European Central Bank Vice President Luis de Guindos said on Monday that the ECB would continue to raise rates in the Eurozone to curb inflation and is not considering revising its own medium-term inflation target of 2%. Germany’s leading Ifo index rose to 88.6 in December from 86.4 in November. The index is now back to levels last seen in the summer. The outlook for Europe’s largest economy is improving despite the energy crisis.

• Support levels: 1.0549, 1.0483, 1.0361, 1.0332, 1.0284, 1.0193
• Resistance levels: 1.0641, 1.0695

The trend on the EUR/USD currency pair on the hourly time frame is bullish. The price is adjusting to the nearest support levels. The MACD indicator has become inactive, and the price is forming a narrow flat. Under such market conditions, buy trades are best considered from the support level of 1.0549 but with additional confirmation. Sell deals can be considered from the resistance level of 1.0641, but it is better with a confirmation in the form of a reverse initiative or 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.

• – US Building Permits (m/m) at 15:30 (GMT+2).

The GBP/USD currency pair

• Prev Open: 1.2143
• Prev Close: 1.2144
• % chg. over the last day: +0.01 %

UK Chancellor Jeremy Hunt instructed the Office for Budget Responsibility (OBR) to “prepare an economic and fiscal outlook to be presented with the Spring Budget on March 15, 2023. There are no significant events on the economic calendar at the start of the week, so GBP/USD is likely to be dependent on the US dollar index until the UK GDP is released on Thursday. A hawkish Fed forecast is supposed to keep the bulls on the dollar index in play, increasing downward pressure on GBP/USD quotes.

• Support levels: 1.2092, 1.2177, 1.2024, 1.1964, 1.1684, 1.1476, 1.1418
• Resistance levels: 1.2218, 1.2308, 1.2431, 1.2519

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 and is approaching the priority change level. The MACD indicator is in the negative zone, but there are signs of divergence, which indicates some weakness of the sellers. Under such market conditions, it is better to look for buy trades from the support level of 1.2092 but with confirmation on the intraday time frames. Sell trades are best sought from the resistance level of 1.2218 but also better with confirmation.

Alternative scenario: if the price breaks down of the 1.2092 support level and fixes below it, the downtrend will likely resume.

The USD/JPY currency pair

• Prev Open: 135.85
• Prev Close: 136.90
• % chg. over the last day: +0.77 %

The Bank of Japan shocked the markets by doubling the 10-year bond yield cap, causing the yen to jump and government bonds to fall, which helped pave the way for a possible policy normalization. The Japanese yen strengthened sharply on the back of this news. Kyodo News reported that Japanese Prime Minister Fumio Kishida is considering a more flexible approach to the 2% inflation target. The Central Bank will likely abandon its soft monetary policy when a new governor of the Bank of Japan is appointed in April 2023. A stronger yen could bring some relief to the Japanese economy, which is struggling with high import costs caused by this year’s yen depreciation.

• Support levels: 133.12, 131.54
• Resistance levels: 134.73, 135.88, 137.03, 138.00, 139.09

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bearish. The price has fallen sharply on the BoJ meeting. The MACD indicator is deeply negative, with no sign of reversal but with a sign of oversold. Buy trades are best considered on intraday time frames from the support level of 133.12, but only with confirmation. Sell deals can be looked for from the resistance level of 134.73, provided there is a reversal.

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

• – Japan BoJ Interest Rate Decision at 05:00 (GMT+2);
• – Japan BoJ Monetary Policy Statement at 05:00 (GMT+2);
• – Japan BoJ Press Conference at 05:00 (GMT+2).

The USD/CAD currency pair

• Prev Open: 1.3677
• Prev Close: 1.3650
• % chg. over the last day: -0.19 %

Oil prices rose on Monday as optimism over China’s easing COVID-19 restrictions outweighed fears of a global recession affecting energy demand. Oil also received support from the US Department of Energy, which said Friday it would begin buying crude oil for the Strategic Petroleum Reserve. A rise in oil prices is always accompanied by a fall in USD/CAD since the Canadian dollar is a commodity currency.

• Support levels: 1.3601, 1.3521, 1.3438, 1.3386, 1.3360, 1.3281, 1.3212
• Resistance levels: 1.3700, 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 average lines, but the price has hit a strong resistance level at 1.3700. The MACD indicator has become inactive, but the divergence indicates that the buyers are limited in their potential. Buy trades should be considered only after a breakout and a fixation above 1.3700. Sell deals is better to look for on the intraday time frames from 1.3601, but with a confirmation in the form of a reverse initiative or after a false breakdown.

Alternative scenario: if the price breaks down and consolidates below the support level of 1.3386, the downtrend will likely resume.

• – Canada Retail Sales (m/m) at 15:30 (GMT+2).