The Analytical Overview of the Main Currency Pairs on 2022.12.21

The EUR/USD currency pair

• Prev Open: 1.0607
• Prev Close: 1.0622
• % chg. over the last day: +0.14 %

ECB officials earlier this week indicated that a 50 bps rate hike at the next meeting is the best-case scenario and is seen as the main scenario within the monetary policy tightening. It is also should ту noted that the ECB decided at its last meeting to start gradually reducing its balance sheet next year. The tightening of monetary policy is usually accompanied by currency appreciation. But investors should also consider the difference between central banks’ interest rates. As long as the US Fed has a higher rate than the ECB, traders should not expect the Euro to strengthen in the medium term.

• Support levels: 1.0549, 1.0483, 1.0361, 1.0332, 1.0284, 1.0193
• Resistance levels: 1.0648, 1.0695

The trend on the EUR/USD currency pair on the hourly time frame is bullish. The MACD indicator has become inactive, volatility is reduced, and the price forms a price corridor. Under such market conditions, it is best to consider buy trades from the support level of 1.0549 but with additional confirmation. Sell deals can be considered from the resistance level of 1.0648, 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.

• – US CB Consumer Confidence (m/m) at 17:00 (GMT+2);
• – US Existing Home Sales (m/m) at 17:00 (GMT+2).

The GBP/USD currency pair

• Prev Open: 1.2145
• Prev Close: 1.2183
• % chg. over the last day: +0.31 %

The British pound remains under pressure due to the interest rate differential between the US Federal Reserve and the Bank of England (BoE). The US Fed is holding the rate at 4.5%, while the Bank of England is at 3.5%. The ECB has become more hawkish, and the Bank of England is expected to end monetary policy tightening ahead of the rest. As early as tomorrow, the UK will release its final GDP data for the quarter, and experts believe the economy will contract by 0.2%, indicating a second consecutive quarter of contraction, which is technically considered the beginning of a recession.

• 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 trend on the GBP/USD currency pair on the hourly time frame is bullish. The price is trading at the level of the moving averages and is approaching the priority change level. The MACD indicator has become inactive, and volatility on the eve of the holidays is reduced. 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 looked for from the resistance level of 1.2218, but also better with confirmation.

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

The USD/JPY currency pair

• Prev Open: 136.88
• Prev Close: 131.70
• % chg. over the last day: -3.93 %

The Bank of Japan changed its yield curve control policy yesterday, raising the ten-year government bond rate target by 25 bps to 0.5%. Raising the bar is a forced measure of tightening monetary policy due to a lack of demand and liquidity in the country’s debt market and capital outflows from Japan to countries. Analysts think that the JPY has all the signs of continuing its strengthening trend as the Bank of Japan is no longer going to tolerate any devaluation of its currency. At the same time, it needs to shift towards policy normalization in order to maintain liquidity.

• Support levels: 131.22
• Resistance levels: 133.53, 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 MACD indicator is deeply negative, without any signs of reversal, but with a sign of oversold. It is best to look for buy trades on intraday time frames from the support of 131.22, but only with confirmation. Sell deals can be sought from the resistance level of 133.53, provided that there is a reverse reaction.

Alternative scenario: If the price fixes above 137.00, the uptrend will likely resume.

The USD/CAD currency pair

• Prev Open: 1.3644
• Prev Close: 1.3611
• % chg. over the last day: -0.24 %

The Bank of Canada announced an increase in dealer limits for overnight repo transactions. The maximum aggregate cash value limit will increase to $5 billion from the previous limit of $1.5 billion per offering. The Bank is increasing these limits to improve the efficiency of its monetary policy implementation operations. OR operations support the effective implementation of monetary policy through intervention and intraday liquidity injections into the overnight general collateral market to reinforce the Bank’s overnight rate target.

• 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. But the price is trading below the moving averages, and the MACD indicator is negative, indicating selling pressure inside the day. Buy trades should be considered from the support level of 1.3601, but with confirmation. Sells are best to look for on intraday time frames from the resistance level of 1.3700, 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.

• – Canada Consumer Price Index (m/m) at 15:30 (GMT+2);
• – US Crude Oil Reserves (w/w) at 17:30 (GMT+2).