InvestMacro

The EUR/USD currency pair

• Prev Open: 1.0020
• Prev Close: 0.9967
• % chg. over the last day: -0.53 %

In her speech yesterday, ECB head Christine Lagarde said that inflation in the Eurozone has been stronger than previously forecast. The main reasons for that are the pandemic and Russia’s invasion of Ukraine. The ECB will continue to pursue a strategy of monetary policy normalization. Normalization implies stopping net asset purchases and raising rates to a neutral level, i.e., a level that is neither stimulative nor restrictive. Thus, the ECB will continue to raise interest rates over the next few meetings.

• Support levels: 0.9912
• Resistance levels: 1.0148, 1.0111, 1.0162, 1.0230

From the technical point of view, the trend on the EUR/USD currency pair on the hourly time frame is bullish. But now, ahead of the Fed meeting, the price is forming a balance, gaining liquidity before an impulse move. The MACD indicator has become negative again. Buy trades can be considered from the level of 0.9912. Sell deals are best to look for from resistance levels of 1.0111 or 1.0162.

Alternative scenario: if the price breaks down through the support level of 0.9912 and fixes below, the downtrend will likely resume.

• – US Existing Home Sales (m/m) at 17:00 (GMT+3);
• – US Fed Interest Rate Decision at 21:00 (GMT+3);
• – US FOMC Statement at 21:00 (GMT+3);
• – US FOMC Economic Projections at 21:00 (GMT+3);
• – US FOMC Press Conference at 21:30 (GMT+3).

The GBP/USD currency pair

• Prev Open: 1.1411
• Prev Close: 1.1379
• % chg. over the last day: -0.28 %

According to analysts, the Bank of England has not yet determined the size of the interest rate hike this week. The situation is complicated by the government’s recently announced energy price guarantee. This will limit households’ energy bills for the next two years and probably significantly reduce short-term inflation forecasts while likely boosting inflation in the medium term. A 50 basis point increase would bring the bank rate to 2.25%. That said, only one bank representative favors a 25 basis point increase. This week’s meeting will also decide on a balance sheet reduction. The bank intends to sell 10 billion pounds each quarter to reduce the balance sheet by 80 billion pounds a year. However, the sales will depend on economic and market conditions.

• Support levels: 1.1351, 1.1300
• Resistance levels: 1.1449, 1.1626, 1.1693, 1.1816, 1.1901, 1.1994, 1.2035, 1.2167

From the technical point of view, the GBP/USD currency pair trend on the hourly time frame has changed to bearish. The price is currently trading at the level of the moving averages and forming a balance. The MACD indicator is in the negative zone, with sellers’ pressure. The price may be forming a false breakdown zone now, which can be used as a support if the price again consolidates above the level of 1.1449. Sell trades are better in the intraday time frames, and the nearest resistance level is 1.1626.

Alternative scenario: if the price breaks out of the 1.1693 resistance level and fixes above it, the uptrend will likely resume.

• – US Fed Interest Rate Decision at 21:00 (GMT+3);
• – US FOMC Statement at 21:00 (GMT+3);
• – US FOMC Economic Projections at 21:00 (GMT+3);
• – US FOMC Press Conference at 21:30 (GMT+3).

The USD/JPY currency pair

• Prev Open: 143.19
• Prev Close: 143.70
• % chg. over the last day: +0.35 %

The yen has temporarily strengthened recently due to news that the Bank of Japan has conducted a currency “check,” a move seen as a precursor to official intervention. Bank of Japan Governor Kuroda said that intervention was “on the table” and, if necessary, it would be carried out quickly and without warning. Meanwhile, Japanese Finance Minister Shunichi Suzuki said that the Bank of Japan would appropriately guide policy, considering prices and the state of the economy. He confirmed that reserve funds would be used for core output and price increases, hinting that additional support measures, rather than currency intervention, may be introduced. Analysts believe that the Bank of Japan (BOJ) is unlikely to change its policy before the end of the year.

• Support levels: 142.57, 141.77, 141.00, 139.61, 138.78, 137.65, 136.80, 135.20
• Resistance levels: 144.21, 145.00

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bullish. The price is trading at the level of the moving averages and forming a balance. The MACD indicator has become positive, and there is a slight buying pressure. Under such market conditions, buy trades can be sought from the support level of 142.57 or 142.10, but with additional confirmation. Sell deals can be searched for on intraday time frames from the resistance level of 144.21 or 145.00, but only with additional confirmation, as fundamentally, USD/JPY quotes are inclined to grow.

Alternative scenario: If the price fixes below 141.00, the downtrend will likely resume.

• – US Fed Interest Rate Decision at 21:00 (GMT+3);
• – US FOMC Statement at 21:00 (GMT+3);
• – US FOMC Economic Projections at 21:00 (GMT+3);
• – US FOMC Press Conference at 21:30 (GMT+3).

The USD/CAD currency pair

• Prev Open: 1.3248
• Prev Close: 1.3366
• % chg. over the last day: +0.89 %

Canada has seen a decline in inflation indicators. For example, the annual consumer price index declined from 7.6% to 7.0%. Core inflation (which excludes food and energy prices) also declined from 6.1% to 5.8% in annual terms. This is the second month in a row that Canada has seen a decrease in annualized inflation, indicating a slowdown. However, it should be noted that the Bank of Canada currently keeps the interest rate at 3.25%, the highest among the major economies. Analysts think that the drop in inflation will cool down the aggression of the Bank of Canada, and its next steps will either be the minimum or the central bank will take a break. Against the backdrop, the Canadian dollar is losing ground against the dollar, as the US Fed is going to raise its interest rate again today.

• Support levels: 1.3298, 1.3212, 1.3053, 1.2990, 1.2958, 1.2936, 1.2900
• Resistance levels: 1.3390

From the point of view of technical analysis, the trend on the USD/CAD currency pair is bullish. The MACD indicator has become inactive, there is buying pressure, but the divergence is increasing. Under such market conditions, buy trades should be considered on the lower time frames from the support level of 1.3298 or 1.3212. For sell deals, it is better to consider the resistance level of 1.3390, but only after an additional confirmation in the form of a false breakout.

Alternative scenario: if the price breaks down and consolidates below the 1.2990 support level, the downtrend will likely resume.

• – US Crude Oil Reserves (w/w) at 17:30 (GMT+3);
• – US Fed Interest Rate Decision at 21:00 (GMT+3);
• – US FOMC Statement at 21:00 (GMT+3);
• – US FOMC Economic Projections at 21:00 (GMT+3);
• – US FOMC Press Conference at 21:30 (GMT+3).

The EUR/USD currency pair

• Prev Open: 1.0007
• Prev Close: 1.0020
• % chg. over the last day: -0.13 %

The risk of recession in the Eurozone has reached its highest level since July 2020 as fears grow that winter energy shortages will cause economic activity to decline. Economists surveyed by Bloomberg now estimate the probability of two consecutive quarters of GDP contraction at 80% over the next 12 months, up from 60% in the previous survey. Germany, the bloc’s largest economy and one of the most exposed to shrinking gas supplies, is likely to contract as soon as this quarter. Inflation is now expected to peak at 9.6% in the next three months, nearly five times the European Central Bank’s target.

• Support levels: 0.9989, 0.9912
• Resistance levels: 1.0148, 1.0111, 1.0162, 1.0230

From the technical point of view, the trend on the EUR/USD currency pair on the hourly time frame is bullish. On Friday, the price formed a false breakdown area below the level of 0.9971, and then on Monday, tested this zone. The MACD indicator became positive, and there is a slight buying pressure. Buy trades may be considered from the 0.9989 level. It is better to look for sell deals from the resistance levels of 1.0111 or 1.0162.

Alternative scenario: if the price breaks down through the support level of 0.9912 and fixes below, the downtrend will likely resume.

• – US Building Permits (m/m) at 15:30 (GMT+3);
• – Eurozone ECB President Lagarde Speaks (m/m) at 20:00 (GMT+3).

The GBP/USD currency pair

• Prev Open: 1.1411
• Prev Close: 1.1415
• % chg. over the last day: +0.04 %

This week the Bank of England will consider whether to hold the largest interest rate hike in 33 years to respond to rising inflation and weakening confidence in British assets. With inflation, at five times the UK Central Bank’s goal of 2%, and the pound falling almost daily, policymakers led by Governor Andrew Bailey are forced to consider tightening monetary policy. The arguments for a 75 basis point hike are already more persuasive than those for a 50 basis point hike. But Prime Minister Liz Truss’ actions to protect households from rising energy bills will give a boost to the economy by softening the recession. So on the other hand, the government’s emergency energy support package reduces the need for an aggressive rate hike.

• Support levels: 1.1400
• Resistance levels: 1.1449, 1.1626, 1.1693, 1.1816, 1.1901, 1.1994, 1.2035, 1.2167

From the technical point of view, the trend on the GBP/USD currency pair on the hourly time frame has changed to bearish. At the moment, the price is trading at the level of moving averages, and the MACD indicator has become inactive. It is quite possible that the price is now forming a false-breakdown zone, which can be used as support if the price again consolidates above the level of 1.1449. Sell trades are better to consider in the intraday time frames, and the nearest resistance level is 1.1626.

Alternative scenario: if the price breaks out of the 1.1693 resistance level and fixes above it, the uptrend will likely resume.

The USD/JPY currency pair

• Prev Open: 142.88
• Prev Close: 143.20
• % chg. over the last day: +0.23 %

The nationwide Consumer Price Index rose to an annualized 2.8% (2.6% previously), the highest reading in 8 years. And while inflation remains above the 2% target, the Bank of Japan cannot be expected to abandon its ultra-soft monetary policy suddenly. Analysts predict that traders should not expect any changes in the Bank of Japan’s monetary policy before the year’s end. Therefore, considering that the US Fed keeps raising the interest rates, the gap between the rates continues to widen, which will put negative pressure on the yen.

• Support levels: 142.57, 141.77, 141.00, 139.61, 138.78, 137.65, 136.80, 135.20
• Resistance levels: 144.21, 145.00

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bullish. The price is trading at the level of the slips and forming a balance. The MACD indicator has become inactive. Under such market conditions, buy trades can be sought from the support level of 142.57, but with additional confirmation. Sell deals can be considered on intraday time frames from the resistance level of 144.21 or 145.00, but only with additional confirmation since, fundamentally, the USD/JPY is inclined to grow.

Alternative scenario: If the price fixes below 141.00, the downtrend will likely resume.

• – Japan National Core Consumer Price Index (m/m) at 02:30 (GMT+3);

The USD/CAD currency pair

• Prev Open: 1.3260
• Prev Close: 1.3250
• % chg. over the last day: -0.08 %

Canada will release Consumer Price Index data today. Canada’s inflation rate is expected to fall for the second month to 7.3% from 7.6% annualized. But the Bank of Canada focuses more on the Core Index, which excludes food and energy prices, and the situation there is much more complicated. The annual core CPI is expected to rise to 6.2% from 6.1%. Therefore, the Bank of Canada is likely to maintain its aggressive stance. On the other hand, a deviation from expectations will signal a continued downward trajectory for inflation. That could revive the discussion about the extent to which the Bank of Canada will hold back tightening at its next meeting. As for the Canadian dollar, its weakness is due to the expectation that the Bank of Canada will “reverse” first. But if core inflation continues to rise, the BOC will remain aggressive, and the USD/CAD uptrend could be interrupted. Of course, the situation can change if inflation shows a decrease, in which case the BOC can take a break from rate hikes.

• Support levels: 1.3220, 1.3053, 1.2990, 1.2958, 1.2936, 1.2900
• Resistance levels: 1.3303, 1.3326

From the point of view of technical analysis, the trend on the USD/CAD currency pair is bullish. The price is trading at the level of moving averages, and the MACD indicator has become inactive. Under such market conditions, buy trades should be considered on the lower time frames from the support level of 1.3220. The best way to sell is to consider the resistance level of 1.3303, but only after an additional confirmation in the form of a false breakdown.

Alternative scenario: if the price breaks down and consolidates below the 1.2990 support level, the downtrend will likely resume.

• – Canada Consumer Price Index (m/m) at 15:30 (GMT+3).