The Analytical Overview of the Main Currency Pairs on 2023.02.22

The EUR/USD currency pair

• Prev Open: 1.0683
• Prev Close: 1.0654
• % chg. over the last day: -0.36 %

The European trading session on Tuesday started positively. The latest Eurozone PMI data exceeded analysts’ expectations, with the service sector business activity index back above the 50 mark, indicating a recovery. Although the manufacturing numbers were down slightly, the overall market reaction in terms of the region’s resilience was positive. The increase surprised many analysts, given the winter months, which traditionally have a negative impact on statistics. But the US session was behind the dollar as business activity in the US manufacturing sector moved out of the contractionary territory, reducing the risk of a hard landing while increasing the possibility that the Fed could tighten monetary policy further.

• Support levels: 1.0629, 1.0653, 1.0618, 1.0544
• Resistance levels: 1.0704, 1.0804, 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 situation has not changed dramatically compared to yesterday. The price formed a false break zone below the level of 1.0653 and returned to the wide-volatile corridor. The MACD indicator has become inactive, but the divergence is still observed in many time frames. Under such market conditions, buy trades are best considered from the support level of 1.0653 or 1.0629, subject to confirmation on the intraday time frames. Sell deals can be considered from the resistance level of 1.0704, but better with confirmation in the form of a reverse initiative on the lower time frames or a false breakout.

Alternative scenario: if the price breaks down through the resistance level of 1.0839 and fixes above it, the uptrend will likely resume.

• – German Consumer Price Index (m/m) at 09:00 (GMT+2);
• – German IFO Business Climate (m/m) at 11:00 (GMT+2);
• – US FOMC Meeting Minutes at 21:00 (GMT+2).

The GBP/USD currency pair

• Prev Open: 1.2035
• Prev Close: 1.2110
• % chg. over the last day: +0.63 %

The UK Manufacturing PMI rose last month from 47 to 49.2 (forecast 47.5). In the services sector, the PMI returned to growth, from 48.7 to 53.3 (forecast 49.2). Survey respondents noted a jump in consumer demand and increased confidence as supply shortages eased and inflation slowed. Unexpectedly strong economic data provided room for more hikes by the Bank of England (BoE), which positively affected the British currency.

• Support levels: 1.2047, 1.2014, 1.1964, 1.1930
• Resistance levels: 1.2139, 1.2200, 1.2267, 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. But yesterday, buyers dominated the day. At the moment, the price is trading at the level of the moving averages and forming a narrow flat, with the price forming another false breakdown zone below the level of 1.2014, which will now act as a support zone. The MACD indicator is in the positive zone but with signs of weakness. Under such market conditions, it is better to look for buy trades on intraday time frames from the support level of 1.2047 or 1.2014, but with confirmation. Sell trades are best sought from the resistance level of 1.2139 but also better with confirmation in the form of a false breakout, as the level has already been tested.

Alternative scenario: if the price breaks out through the 1.2200 resistance level and fixes above it, the uptrend will likely resume.

The USD/JPY currency pair

• Prev Open: 134.22
• Prev Close: 135.02
• % chg. over the last day: +0.59 %

Just a few weeks ago, traders were convinced the US Federal Reserve would pause its rate hike cycle in the first quarter and begin cutting rates in the second half of the year, with the new governor of the Bank of Japan targeting monetary policy changes. But all these expectations have disappeared. Strong US economic data brought back fears of further rate hikes, while the new BOJ governor is likely temporarily to keep monetary policy soft. The divergence in monetary policy will contribute to further growth of USD/JPY quotes.

• Support levels: 134.11, 133.47, 132.95, 131.43, 129.68, 129.98, 129.19,
• Resistance levels: 135.88

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bullish. At the moment, the price is trading in a narrow corridor on the level of moving averages. The MACD indicator is in the positive zone, but signs of divergence are still observed in several time frames. Buying pressure is present, but the higher it is, the harder it is for the price to move. It is better to look for buy trades from the support level of 134.11 or 133.47, but only with confirmation on the lower time frames. Sell deals can be sought from the 135.88 level, 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: 1.3447
• Prev Close: 1.3536
• % chg. over the last day: +0.66 %

Inflationary pressures in Canada continue to decline. The latest data showed that the annualized consumer price index fell from 6.3% to 5.9% (forecast 6.1%). Core inflation, which excludes food and energy, fell to 5.0% from 5.4% (5.5% forecast). With this data in the background, the Bank of Canada is not likely to raise interest rates further to avoid putting additional pressure on the economy. However, since the US Federal Reserve has not yet completed its tightening cycle, USD/CAD quotes may rise due to the dollar index strengthening, and oil prices decline.

• Support levels: 1.3469, 1.3441, 1.3390, 1.3347, 1.3295, 1.3212
• Resistance levels: 1.3538, 1.3595

From the point of view of technical analysis, the trend on the USD/CAD currency pair is bullish. The MACD indicator has become positive, but there are the first signs of divergence. Buy trades can be considered from the support level of 1.3469, but with additional confirmation on the lower time frames. Impulse return of the price below the level of 1.3538 will open opportunities for sales with good targets.

Alternative scenario: if the price breaks down and consolidates below the support level of 1.3390, the downtrend will likely resume.