The Analytical Overview of the Main Currency Pairs on 2023.01.05

The EUR/USD currency pair

• Prev Open: 1.0545
• Prev Close: 1.0603
• % chg. over the last day: +0.55 %

According to the minutes of the Federal Reserve’s December meeting, Federal Reserve policymakers agreed that an extended period of restrictive policy would be needed to cool “unacceptably high” inflation. The Open Market Committee (FOMC) raised its rate target to a range of 5% to 5.25%. Minneapolis Fed President Neel Kashkari predicts the Fed will raise rates to 5.4%, after which the Central Bank will take a long pause. Markets expect the Fed to raise rates by 0.25% at its next meeting on February 1, with an 84% probability of such a scenario.

• Support levels: 1.0574, 1.0554, 1.0528, 1.0483, 1.0361, 1.0332, 1.0284
• Resistance levels: 1.0640, 1.0664, 1.0695

The trend on the EUR/USD currency pair on the hourly time frame is still bullish. The price is trading at the level of moving averages and above the priority change level. The MACD indicator is positive again. Under such market conditions, buy trades are best considered from the support level of 1.0574 or 1.0554 on intraday time frames. Sell deals can be considered from the resistance level of 1.0640 but better with confirmation in the form of a reverse initiative or a false breakout.

Alternative scenario: if the price breaks down through the support level of 1.0528 and fixes below it, the downtrend will likely resume.

• – Italian Consumer Price Index (m/m) at 12:00 (GMT+2);
• – US ADP Non-Farm Employment Change (m/m) at 15:15 (GMT+2);
• – US Initial Jobless Claims (w/w) at 15:30 (GMT+2).

The GBP/USD currency pair

• Prev Open: 1.1965
• Prev Close: 1.2057
• % chg. over the last day: +0.77 %

In the macro outlook for 2023, Goldman Sachs analysts forecast a 1.2% decline in UK real GDP, well below all other G-10 countries. According to the report, the Eurozone and the UK are already in recession, and more stretched-out increases in energy bills will push inflation to higher peaks than in other countries. High inflation will affect real personal income, consumption, and industrial production. Investors are dumping the sterling, believing that a weakening UK economy will prevent the Bank of England from being as hawkish as its peers.

• Support levels: 1.2000, 1.1944, 1.1893, 1.1684, 1.1476, 1.1418
• Resistance levels: 1.2100, 1.2166, 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. But yesterday, the price rose sharply and approached the priority change level. The MACD indicator became positive, and the buyers dominated inside the day. Under such market conditions, it is better to look for buy trades on the intraday timeframes from the support level 1.2000 or 1.1944, but with confirmation. Sell trades are best looked for from the resistance level of 1.2166, but they are also better with confirmation.

Alternative scenario: if the price breaks out through the 1.2100 resistance level and fixes above it, the uptrend will likely resume.

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

The USD/JPY currency pair

• Prev Open: 131.01
• Prev Close: 132.64
• % chg. over the last day: +1.24 %

According to the latest S&P Global PMI data, the decline in Japan’s manufacturing sector worsened in the last month of the year. The Manufacturing Business Activity Index fell from 49.0 to 48.9, the second consecutive month of declining activity. Weak global economic trends led to a steady decline in production and a drop in new orders. Companies have markedly reduced purchases of inputs, and optimism has weakened to its highest level since May.

• Support levels: 130.58, 129.65, 128.85
• Resistance levels: 132.92, 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. But the price is now trading above the moving averages, while the MACD indicator has become positive, indicating buying pressure inside the day. Buy trades are best considered on intraday time frames from the support level of 130.58, but only with confirmation. Sell deals can be looked for from the resistance level of 132.92, provided there is a reversal.

Alternative scenario: If the price fixes above 132.92, the uptrend will likely resume.

The USD/CAD currency pair

• Prev Open: 1.3665
• Prev Close: 1.3477
• % chg. over the last day: -1.39 %

Global growth concerns, along with growing COVID-19 problems in China (the largest oil importer) caused the black gold price to drop another 5% yesterday. The overall drop in oil over the last 2 days was almost 10%. Considering that the Canadian dollar is a commodity currency and is highly correlated with the dollar index and oil prices, the prices of USD/CAD continued to decline sharply on Wednesday. With China increasing its export quotas for petroleum products in the first batch for 2023, indicating expectations of low domestic demand, the oil may continue to fall, which is negative for the Canadian currency.

• Support levels: 1.3478, 1.3439, 1.3386, 1.3360, 1.3281, 1.3212
• Resistance levels: 1.3530, 1.3604, 1.3640, 1.3700, 1.3776, 1.3855

From the point of view of technical analysis, the trend on the USD/CAD currency pair is close to changing to bearish. The price is trading below the moving averages. The MACD indicator has become deeply negative, and inside the day, sales prevail. A price fixation below 1.3478 will lead to a change of trend to a downtrend. Buy trades should be considered from the support level of 1.3478, but with confirmation, since the level has already been tested. Sell deals are better to look for on the intraday time frames from the resistance level of 1.3530 or 1.3604, but with a confirmation in the form of a reverse initiative on the lower time frames or a false breakout.

Alternative scenario: if the price breaks down and consolidates below the support level of 1.3478, the downtrend will likely resume.

• – US Crude Oil Reserves (w/w) at 18:00 (GMT+2).