The Analytical Overview of the Main Currency Pairs on 2023.01.03

The EUR/USD currency pair

• Prev Open: 1.0696
• Prev Close: 1.0658
• % chg. over the last day: -0.35 %

The ECB is expected to go against the trend of most other major central banks early this year and continue its aggressive pace of rate hikes, even though inflationary pressures across Europe are forecast to ease this week. The ECB was the last of the big central banks to start raising rates, which means Europe’s Central Bank has more “room” to continue tightening. Moreover, the index of business activity in the manufacturing sector indicates that the European industry has already adapted to high prices, the recession in manufacturing activity in the euro area is probably over, and supply chains are recovering.

• Support levels: 1.0638, 1.0589, 1.0483, 1.0361, 1.0332, 1.0284, 1.0193
• Resistance levels: 1.0689

The EUR/USD currency pair trend on the hourly time frame is still bullish. The price is still trading in a wide price corridor. The MACD indicator has become negative. Volatility remains low. Under such market conditions, buy trades are best considered from the support level of 1.0638 on intraday time frames. Sell deals can be considered from the resistance level of 1.0689, but better with confirmation in the form of a reverse initiative or a false breakout since the level has already been tested.

Alternative scenario: if the price breaks down through the support level of 1.0549 and fixes below it, the downtrend will likely resume.

• – German Unemployment Rate (m/m) at 10:55 (GMT+2);
• – German Consumer Price index (m/m) at 15:00 (GMT+2);
• – US Manufacturing PMI (m/m) at 16:45 (GMT+2).

The GBP/USD currency pair

• Prev Open: 1.2061
• Prev Close: 1.2044
• % chg. over the last day: -0.14 %

The Bank of England is expected to start slowing the pace of rate hikes as inflation declines, as UK economic indicators point to a recessionary scenario. The Resolution Foundation has warned that the cost-of-living crisis, which has led to a sharp drop in living standards, will continue into the new year. Income is expected to fall another 3.8%, and households will continue to struggle with soaring energy prices and tax increases.

• Support levels: 1.2057, 1.1999, 1.1979, 1.1684, 1.1476, 1.1418
• Resistance levels: 1.2167, 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 bearish. The MACD indicator has become inactive, and the price is trading in a narrow price corridor, but there are signs of buying strength inside the day. Under such market conditions, it is better to look for buy trades on intraday time frames from the support level of 1.2057, but with confirmation. Sell trades are best sought from the resistance level of 1.2167 but also better with confirmation.

Alternative scenario: if the price breaks out through the 1.2308 resistance level and fixes above it, the uptrend will likely resume.

• – UK Manufacturing PMI (m/m) at 11:30 (GMT+2).

The USD/JPY currency pair

• Prev Open: 130.91
• Prev Close: 130.61
• % chg. over the last day: -0.23 %

The Japanese yen has strengthened by about 16% from its October low amid Bank of Japan intervention, as well as hopes of a slowdown in US interest rate hikes and speculation about possible Bank of Japan policy changes this year. The Bank of Japan’s unexpected December decision to change the parameters for managing the yield curve is still seen by many as a sign that ultra-easy monetary policy may soon come to an end. But traders should not expect any changes before the spring of 2023.

• Support levels: 129.65, 128.33
• Resistance levels: 131.24, 133.58, 134.45, 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 is now trading below the moving averages, while the MACD indicator is in the negative zone, but there is a divergence. There is selling pressure inside the day. Buy trades are best considered on intraday time frames from support at 129.65, but only with confirmation. Sell deals can be sought from the resistance level of 131.22, provided there is a reversal.

Alternative scenario: If the price fixes above 133.58, the uptrend will likely resume.

The USD/CAD currency pair

• Prev Open: 1.3550
• Prev Close: 1.3570
• % chg. over the last day: +0.14 %

The USD/CAD currency pair gained 7% over 2022 primarily due to the US Federal Reserve’s tightening of monetary policy, which led to a 7.61% rise in the dollar index. WTI crude oil price rose by 4.57% over the year, which helped keep the Canadian dollar from plummeting. It should also be noted that the Bank of Canada was one of the first to begin tightening monetary policy but did it less aggressively than the US Fed, so now the US Fed rate (4.5%) is slightly higher than the Bank of Canada rate (4.25%). The Bank of Canada is projected to schedule another 0.25% rate hike in January and then keep rates at 4.5% through the end of 2023. With the US Fed starting to slow the rate hikes and Canada’s economic outlook now more optimistic, this could play for the Canadian currency’s strength in the first half of 2023.

• Support levels: 1.3437, 1.3386, 1.3360, 1.3281, 1.3212
• Resistance levels: 1.3583, 1.3614, 1.3656, 1.3700, 1.3776, 1.3855

From the point of view of technical analysis, the trend on the USD/CAD currency pair is still bullish. The price forms a wide price corridor. The MACD indicator is in the positive zone, but sales prevail during the day. Buy trades should be considered from the support level of 1.3537, but with confirmation. Sell deals are best to look for on intraday time frames from the resistance level of 1.3583, but with confirmation in the form of reverse initiative on the lower time frames.

Alternative scenario: if the price breaks down and consolidates below the support level of 1.3529, the downtrend will likely resume.

• – OPEC+ Meeting (m/m) at 12:00 (GMT+2);
• – Canada Manufacturing PMI (m/m) at 16:30 (GMT+2).