By JustMarkets
The EU economy has not yet felt the full impact of an interest rate hike from the European Central Bank, two senior ECB officials said Thursday. Nevertheless, the Eurozone economy is holding up better than expected, and inflation indicators are trending downward. According to ECB policymakers, overall inflation in the Eurozone could fall below 3% by the end of the year if falling energy prices continue. Financial markets expect the ECB to raise the bank deposit rate to at least 3.5% by summer 2023.
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 is negative again, but the divergence is becoming more pronounced on many timeframes. Under such market conditions, buy trades are best considered from the support level of 1.0597. Sell deals can be considered from the resistance level of 1.0695, 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 1.0839 and fixes above it, the uptrend will likely resume.
The recent rise in the dollar has knocked the pound sterling’s confidence. St. Louis Federal Reserve Bank President James Bullard said yesterday that the prospect of the US Federal Reserve returning to larger hikes is not out of the table. Bullard’s comments echoed those of Cleveland Fed President Loretta Mester, who said she saw a compelling case for a 0.5% rate hike at the Fed’s last meeting. The dollar index has short-term fundamental support right now. In the medium term, the US Fed and the Bank of England are at the end of the rate hike cycle. Therefore, traders should not expect medium-term trends in the GBP/USD currency pair.
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 but with signs of divergence. Under such market conditions, it is better to look for buy trades on intraday time frames from the support level of 1.1930 but with a confirmation in the form of a false breakdown. Sell deals are best sought from the resistance level of 1.2055 or 1.2118, but also better with a confirmation in the form of a reverse initiative on the lower time frames.
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Alternative scenario: if the price breaks out through the 1.2200 resistance level and fixes above it, the uptrend will likely resume.
The appointment of former Bank of Japan policy council representative Kazuo Ueda as central bank governor has cooled rumors of an earlier interest rate normalization. In the past, Ueda has warned of the dangers of premature interest rate hikes, dispelling any fears of higher interest rates in the foreseeable future. However, a reassessment of the yield curve management policy cannot be ruled out, given that he has pointed out its potential shortcomings.
From the technical point of view, the medium-term trend on the currency pair USD/JPY is bullish. The price is trading above the moving averages, but it has reached the daily resistance level. The MACD indicator is in the positive zone, and there are signs of divergence already on several timeframes. Buying pressure is present, but it is limited. It is best to look for buy deals from the support level of 133.47 or 132.95, but only with confirmation on the lower time frames. Sell deals can be sought 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 US and Canada are closely linked economies. Their economic health and financial flows between them are fairly stable relative to external exchange rates. The US Fed and the Bank of Canada practically go hand in hand in terms of raising interest rates, so only energy prices, especially oil prices, will cause an imbalance in USD/CAD pricing. The OPEC+ countries do not intend to lose profits on the background of falling oil prices and will try by all means to keep the quotations from falling, up to a reduction of the production volume. A significant rise in oil prices is also undesirable as it might trigger a new wave of inflation while the rates are already at their highest levels.
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. The MACD indicator is in the positive zone, with no signs of divergence. Buy trades can be considered from the support of 1.3390, but with additional confirmation on the lower time frames. Sell deals should be considered from the resistance level of 1.3497 or 1.3520, but on the condition of a reverse reaction or false breakout, as the levels have already been tested.
Alternative scenario: if the price breaks down and consolidates below the support level of 1.3263, the downtrend will likely resume.
By JustMarkets
This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.
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