The Analytical Overview of the Main Currency Pairs on 2023.02.16

The EUR/USD currency pair

• Prev Open: 1.0736
• Prev Close: 1.0686
• % chg. over the last day: -0.47 %

ECB head Christine Lagarde said yesterday that she would vote for a 0.5% rate hike at the next ECB meeting. The medium-term outlook for the euro remains bullish, but the EUR/USD is pulling lower amid a temporary rise in the dollar index. The dollar index is rising on the back of strong US economic data (labor market, GDP, industrial production), which opens up more room for the Fed to raise rates.

• Support levels: 1.0696, 1.0651, 1.0597
• Resistance levels: 1.0839, 1.0906, 1.0926, 1.0967, 1.1017, 1.1077

The trend on the EUR/USD currency pair on the hourly time frame is bearish. The price forms a wide corridor, inside which there is a downward channel. The MACD indicator has become inactive again. Under such market conditions, buy trades are best considered on the lower time frames from the support level of 1.0696 or after the impulse breakout from the descending channel. Sell deals can be considered from the resistance level of 1.0839, but it is better with confirmation in the form of a reverse initiative on the lower time frames.

Alternative scenario: if the price breaks down through the resistance level of 1.0926 and fixes above it, the uptrend will likely resume.

• – US Building Permits (m/m) at 15:30 (GMT+2);
• – US Initial Jobless Claims (w/w) at 15:30 (GMT+2);
• – US Philadelphia Fed Manufacturing Index (m/m) at 15:30 (GMT+2);
• – US Producer Price Index (m/m) at 15:30 (GMT+2);
• – US FOMC Member Mester Speaks at 15:45 (GMT+2);
• – US FOMC Member Bullard Speaks at 20:30 (GMT+2).

The GBP/USD currency pair

• Prev Open: 1.2169
• Prev Close: 1.2032
• % chg. over the last day: -1.14 %

The UK Consumer Price Index (CPI) fell from 10.5% to 10.1% (forecast 10.3%) in annual terms. Core inflation fell even more, from 6.3% to 5.8% (forecast 6.2%). Such data on the back of a strong labor market may provide the Bank of England with at least another 0.25% rate hike at its next meeting. The report indicates that the January 2023 decline mainly reflects price changes in the transportation segment. There was also a downward effect in the services sector. Since there is no mention of energy, the peak of UK inflation has likely passed. But since inflation remains extremely high and much higher than in other economies, the British pound reacted very negatively to the data.

• Support levels: 1.2000, 1.1930
• Resistance levels: 1.2055, 1.2117, 1.2188, 1.2311, 1.2416

From the technical point of view, the trend on the GBP/USD currency pair on the hourly time frame is bearish. At the moment, the price is trading below the moving averages, and sellers’ pressure remains intraday. The MACD indicator has become negative, with no signs of divergence. Under such market conditions, it is better to look for buy trades on intraday time frames from the support level of 1.2200, but with a confirmation in the form of a false breakdown. Sell deals are best to look for from the resistance level of 1.2055 or 1.2117, but also better with a confirmation in the form of a reverse initiative on the lower time frames.

Alternative scenario: if the price breaks out through the 1.2416 resistance level and fixes above it, the uptrend will likely resume.

The USD/JPY currency pair

• Prev Open: 133.10
• Prev Close: 134.16
• % chg. over the last day: +0.80 %

Kazuo Ueda, nominated by the Japanese government as the next governor of the Bank of Japan (BoJ), will inherit a number of difficult challenges when he replaces the current governor Haruhiko Kuroda on April 8. Annualized inflation in Japan reached 4% in December, the highest level since January 1991, while GDP in the fourth quarter did not meet expectations of a 2% rise on an annualized basis and grew by a modest 0.6%. The new Central Bank Governor will have to decide when and by how much the Bank of Japan should start cutting back on its ultra-soft monetary policy in order to restrain inflation while allowing a sufficient reserve of the money supply to allow the economy to grow. It is unlikely that the new BOJ Governor will make any harsh statements on his first day in office, but there is a high probability that the BOJ will abandon its soft policy this year.

• Support levels: 133.47, 132.95, 131.43, 129.68, 129.98, 129.19, 129.04, 128.16
• Resistance levels: 134.65

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bullish. The price is traded above the moving averages while not falling below dynamic lines, supporting the upward movement. The MACD indicator is in the positive zone, but there are signs of divergence already on several timeframes. Buying pressure is present, but it is limited. It is best to look for buy trades from the support level of 133.47 or 132.95, but only with confirmation on the lower time frames. Sell deals can be sought after an impulse return of the price below the level of 132.95 or from 134.65, but with additional confirmation.

Alternative scenario: if the price fixes below the 131.43 support level, the downtrend will be resumed with a high probability.

The USD/CAD currency pair

• Prev Open: 1.3336
• Prev Close: 1.3392
• % chg. over the last day: +0.42 %

The International Energy Agency (IEA) raised its 2023 oil demand forecast by 500,000 BPD to nearly 102 million BPD. The agency also warned that an alliance of OPEC+ producers might try to cut production to support oil prices. What does this mean for USD/CAD quotes? With the Bank of Canada and the US Federal Reserve holding rates almost at the same level, only oil prices will be the imbalance in pricing. And since the Canadian dollar is a commodity currency, rising oil prices will strengthen the Canadian (USD/CAD decline).

• Support levels: 1.3347, 1.3295, 1.3212
• Resistance levels: 1.3390, 1.3472, 1.3496, 1.3520, 1.3554, 1.3595

From the point of view of technical analysis, the trend on the USD/CAD currency pair is bullish. The price is trading above the moving averages again. The MACD indicator has become positive, but there is some seller pressure inside the day. Buy trades can be considered from the support of 1.3347, but with additional confirmation on the lower time frames. Sell deals should be considered from the resistance level of 1.3390 but on the condition of a reverse reaction. Also, sales can be looked for after a false breakout of the 1.3439 resistance level.

Alternative scenario: if the price breaks down and consolidates below the support level of 1.3263, the downtrend will likely resume.