InvestMacro

The EUR/USD currency pair

• Prev Open: 1.0607
• Prev Close: 1.0622
• % chg. over the last day: +0.14 %

ECB officials earlier this week indicated that a 50 bps rate hike at the next meeting is the best-case scenario and is seen as the main scenario within the monetary policy tightening. It is also should ту noted that the ECB decided at its last meeting to start gradually reducing its balance sheet next year. The tightening of monetary policy is usually accompanied by currency appreciation. But investors should also consider the difference between central banks’ interest rates. As long as the US Fed has a higher rate than the ECB, traders should not expect the Euro to strengthen in the medium term.

• Support levels: 1.0549, 1.0483, 1.0361, 1.0332, 1.0284, 1.0193
• Resistance levels: 1.0648, 1.0695

The trend on the EUR/USD currency pair on the hourly time frame is bullish. The MACD indicator has become inactive, volatility is reduced, and the price forms a price corridor. Under such market conditions, it is best to consider buy trades from the support level of 1.0549 but with additional confirmation. Sell deals can be considered from the resistance level of 1.0648, but it is better with a confirmation in the form of a reverse initiative or a false breakout, as the level has already been tested.

Alternative scenario: if the price breaks down through the support level of 1.0446 and fixes below it, the downtrend will likely resume.

• – US CB Consumer Confidence (m/m) at 17:00 (GMT+2);
• – US Existing Home Sales (m/m) at 17:00 (GMT+2).

The GBP/USD currency pair

• Prev Open: 1.2145
• Prev Close: 1.2183
• % chg. over the last day: +0.31 %

The British pound remains under pressure due to the interest rate differential between the US Federal Reserve and the Bank of England (BoE). The US Fed is holding the rate at 4.5%, while the Bank of England is at 3.5%. The ECB has become more hawkish, and the Bank of England is expected to end monetary policy tightening ahead of the rest. As early as tomorrow, the UK will release its final GDP data for the quarter, and experts believe the economy will contract by 0.2%, indicating a second consecutive quarter of contraction, which is technically considered the beginning of a recession.

• Support levels: 1.2092, 1.2177, 1.2024, 1.1964, 1.1684, 1.1476, 1.1418
• Resistance levels: 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 bullish. The price is trading at the level of the moving averages and is approaching the priority change level. The MACD indicator has become inactive, and volatility on the eve of the holidays is reduced. Under such market conditions, it is better to look for buy trades from the support level of 1.2092 but with confirmation on the intraday time frames. Sell trades are best looked for from the resistance level of 1.2218, but also better with confirmation.

Alternative scenario: if the price breaks down from the 1.2092 support level and fixes below it, the downtrend will likely resume.

The USD/JPY currency pair

• Prev Open: 136.88
• Prev Close: 131.70
• % chg. over the last day: -3.93 %

The Bank of Japan changed its yield curve control policy yesterday, raising the ten-year government bond rate target by 25 bps to 0.5%. Raising the bar is a forced measure of tightening monetary policy due to a lack of demand and liquidity in the country’s debt market and capital outflows from Japan to countries. Analysts think that the JPY has all the signs of continuing its strengthening trend as the Bank of Japan is no longer going to tolerate any devaluation of its currency. At the same time, it needs to shift towards policy normalization in order to maintain liquidity.

• Support levels: 131.22
• Resistance levels: 133.53, 134.73, 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. The MACD indicator is deeply negative, without any signs of reversal, but with a sign of oversold. It is best to look for buy trades on intraday time frames from the support of 131.22, but only with confirmation. Sell deals can be sought from the resistance level of 133.53, provided that there is a reverse reaction.

Alternative scenario: If the price fixes above 137.00, the uptrend will likely resume.

The USD/CAD currency pair

• Prev Open: 1.3644
• Prev Close: 1.3611
• % chg. over the last day: -0.24 %

The Bank of Canada announced an increase in dealer limits for overnight repo transactions. The maximum aggregate cash value limit will increase to $5 billion from the previous limit of $1.5 billion per offering. The Bank is increasing these limits to improve the efficiency of its monetary policy implementation operations. OR operations support the effective implementation of monetary policy through intervention and intraday liquidity injections into the overnight general collateral market to reinforce the Bank’s overnight rate target.

• Support levels: 1.3601, 1.3521, 1.3438, 1.3386, 1.3360, 1.3281, 1.3212
• Resistance levels: 1.3700, 1.3776, 1.3855

From the point of view of technical analysis, the trend on the USD/CAD currency pair has changed to bullish. But the price is trading below the moving averages, and the MACD indicator is negative, indicating selling pressure inside the day. Buy trades should be considered from the support level of 1.3601, but with confirmation. Sells are best to look for on intraday time frames from the resistance level of 1.3700, but with confirmation in the form of a reverse initiative or after a false breakout, since the level has already been tested.

Alternative scenario: if the price breaks down and consolidates below the support level of 1.3386, the downtrend will likely resume.

• – Canada Consumer Price Index (m/m) at 15:30 (GMT+2);
• – US Crude Oil Reserves (w/w) at 17:30 (GMT+2).

The EUR/USD currency pair

• Prev Open: 1.0585
• Prev Close: 1.0606
• % chg. over the last day: +0.19

European Central Bank Vice President Luis de Guindos said on Monday that the ECB would continue to raise rates in the Eurozone to curb inflation and is not considering revising its own medium-term inflation target of 2%. Germany’s leading Ifo index rose to 88.6 in December from 86.4 in November. The index is now back to levels last seen in the summer. The outlook for Europe’s largest economy is improving despite the energy crisis.

• Support levels: 1.0549, 1.0483, 1.0361, 1.0332, 1.0284, 1.0193
• Resistance levels: 1.0641, 1.0695

The trend on the EUR/USD currency pair on the hourly time frame is bullish. The price is adjusting to the nearest support levels. The MACD indicator has become inactive, and the price is forming a narrow flat. Under such market conditions, buy trades are best considered from the support level of 1.0549 but with additional confirmation. Sell deals can be considered from the resistance level of 1.0641, but it is better with a confirmation in the form of a reverse initiative or false breakout because the level has already been tested.

Alternative scenario: if the price breaks down through the support level of 1.0446 and fixes below it, the downtrend will likely resume.

• – US Building Permits (m/m) at 15:30 (GMT+2).

The GBP/USD currency pair

• Prev Open: 1.2143
• Prev Close: 1.2144
• % chg. over the last day: +0.01 %

UK Chancellor Jeremy Hunt instructed the Office for Budget Responsibility (OBR) to “prepare an economic and fiscal outlook to be presented with the Spring Budget on March 15, 2023. There are no significant events on the economic calendar at the start of the week, so GBP/USD is likely to be dependent on the US dollar index until the UK GDP is released on Thursday. A hawkish Fed forecast is supposed to keep the bulls on the dollar index in play, increasing downward pressure on GBP/USD quotes.

• Support levels: 1.2092, 1.2177, 1.2024, 1.1964, 1.1684, 1.1476, 1.1418
• Resistance levels: 1.2218, 1.2308, 1.2431, 1.2519

From the technical point of view, the GBP/USD currency pair trend on the hourly time frame is bullish. But the price is trading below the moving averages and is approaching the priority change level. The MACD indicator is in the negative zone, but there are signs of divergence, which indicates some weakness of the sellers. Under such market conditions, it is better to look for buy trades from the support level of 1.2092 but with confirmation on the intraday time frames. Sell trades are best sought from the resistance level of 1.2218 but also better with confirmation.

Alternative scenario: if the price breaks down of the 1.2092 support level and fixes below it, the downtrend will likely resume.

The USD/JPY currency pair

• Prev Open: 135.85
• Prev Close: 136.90
• % chg. over the last day: +0.77 %

The Bank of Japan shocked the markets by doubling the 10-year bond yield cap, causing the yen to jump and government bonds to fall, which helped pave the way for a possible policy normalization. The Japanese yen strengthened sharply on the back of this news. Kyodo News reported that Japanese Prime Minister Fumio Kishida is considering a more flexible approach to the 2% inflation target. The Central Bank will likely abandon its soft monetary policy when a new governor of the Bank of Japan is appointed in April 2023. A stronger yen could bring some relief to the Japanese economy, which is struggling with high import costs caused by this year’s yen depreciation.

• Support levels: 133.12, 131.54
• Resistance levels: 134.73, 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. The price has fallen sharply on the BoJ meeting. The MACD indicator is deeply negative, with no sign of reversal but with a sign of oversold. Buy trades are best considered on intraday time frames from the support level of 133.12, but only with confirmation. Sell deals can be looked for from the resistance level of 134.73, provided there is a reversal.

Alternative scenario: If the price fixes above 139.00, the uptrend will likely resume.

• – Japan BoJ Interest Rate Decision at 05:00 (GMT+2);
• – Japan BoJ Monetary Policy Statement at 05:00 (GMT+2);
• – Japan BoJ Press Conference at 05:00 (GMT+2).

The USD/CAD currency pair

• Prev Open: 1.3677
• Prev Close: 1.3650
• % chg. over the last day: -0.19 %

Oil prices rose on Monday as optimism over China’s easing COVID-19 restrictions outweighed fears of a global recession affecting energy demand. Oil also received support from the US Department of Energy, which said Friday it would begin buying crude oil for the Strategic Petroleum Reserve. A rise in oil prices is always accompanied by a fall in USD/CAD since the Canadian dollar is a commodity currency.

• Support levels: 1.3601, 1.3521, 1.3438, 1.3386, 1.3360, 1.3281, 1.3212
• Resistance levels: 1.3700, 1.3776, 1.3855

From the point of view of technical analysis, the trend on the USD/CAD currency pair has changed to bullish. The price is trading above the average lines, but the price has hit a strong resistance level at 1.3700. The MACD indicator has become inactive, but the divergence indicates that the buyers are limited in their potential. Buy trades should be considered only after a breakout and a fixation above 1.3700. Sell deals is better to look for on the intraday time frames from 1.3601, but with a confirmation in the form of a reverse initiative or after a false breakdown.

Alternative scenario: if the price breaks down and consolidates below the support level of 1.3386, the downtrend will likely resume.

• – Canada Retail Sales (m/m) at 15:30 (GMT+2).

The EUR/USD currency pair

• Prev Open: 1.0622
• Prev Close: 1.0584
• % chg. over the last day: -0.36 %

The latest US inflation report highlighted the peak of the Fed’s hawkish stance. But the largest component of the Consumer Price Index continues to rise, leaving concerns about tight prices ahead. San Francisco Fed President Mary Daley said Friday that the central bank is “far” from its goal of price stability and that the market remains more dovish than the Fed predicts about interest rates going forward.

• Support levels: 1.0549, 1.0483, 1.0361, 1.0332, 1.0284, 1.0193
• Resistance levels: 1.0641, 1.0695

The trend on the EUR/USD currency pair on the hourly time frame is bullish. The price is correcting to the nearest support levels. The MACD indicator became negative, and within the day, sales prevailed. Under such market conditions, buy trades are best considered from the support level of 1.0549 but with additional confirmation. Sell deals can be considered from the resistance level 1.0641, but it is better with a confirmation in the form of a reverse initiative or false breakout because the level has already been tested.

Alternative scenario: if the price breaks down through the support level of 1.0446 and fixes below it, the downtrend will likely resume.

• – Germany Ifo Business Climate (m/m) at 11:00 (GMT+2).

The GBP/USD currency pair

• Prev Open: 1.2177
• Prev Close: 1.2137
• % chg. over the last day: -0.33 %

According to S&P Global Chief Business Economist Chris Williamson, the latest economic data raises the possibility that the UK is already in recession, with PMIs pointing to a 0.3% contraction in fourth quarter GDP after a 0.2% decline. This week the UK will release its final Q4 GDP data, and experts believe the economy will enter a technical recession. In addition to the stagnant economy, the UK is in a series of strikes that will hit the economy even harder. Strikes by nurses, railway workers, and postal services in December will cause not only economic damage but also provoke civil unrest.

• Support levels: 1.2092, 1.2177, 1.2024, 1.1964, 1.1684, 1.1476, 1.1418
• Resistance levels: 1.2197, 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 bullish. But the price is trading below the moving averages and is approaching the priority change level. The MACD indicator is in the negative zone, but there are signs of divergence, which indicates some weakness of the sellers. Under such market conditions, it is better to look for buy trades from the support level of 1.2092 but with confirmation on the intraday time frames. Sell trades are best looked for from the resistance level of 1.2197, but they are also better with confirmation.

Alternative scenario: if the price breaks down of the 1.2100 support level and fixes below it, the downtrend will likely resume.

The USD/JPY currency pair

• Prev Open: 137.76
• Prev Close: 136.71
• % chg. over the last day: -0.76 %

The Bank of Japan will hold a monetary policy and interest rate meeting this week. The “ultra-dovish” Bank of Japan is expected to adhere to a negative interest rate policy. Bank of Japan Governor Haruhiko Kuroda is due to step down in April 2023 after ten years at the helm, and major policy changes before then are unlikely. Meanwhile, new inflation data this week will show another rise in consumer prices.

• Support levels: 135.61
• Resistance levels: 136.81, 138.00, 139.09, 140.75, 143.17, 145.16

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bearish, but the probability of change in the trend is increasing. The price is forming a wide-volatile flat, and the MACD indicator indicates that it is getting harder for the sellers to put pressure on the price. Buy trades are best considered on intraday time frames from the support level of 135.61, but only with confirmation. Sell deals can be looked for from the resistance level of 136.81, provided there is a reverse reaction.

Alternative scenario: If the price fixes above 139.00, the uptrend will likely resume.

The USD/CAD currency pair

• Prev Open: 1.3656
• Prev Close: 1.3696
• % chg. over the last day: +0.29 %

Renewed recession fears and long-term interest rate hikes by global central banks stifled oil’s recovery from last week. Rising rates are negatively affecting the demand for “black” gold, which translates into lower quotes. The Canadian dollar is a commodity currency, so falling oil prices lead to a weakening of the Canadian national currency (growth of USD/CAD). However, in the mid-term, the Canadian dollar has strong fundamental support from the Bank of Canada as the latter keeps one of the highest interest rates.

• Support levels: 1.3601, 1.3521, 1.3438, 1.3386, 1.3360, 1.3281, 1.3212
• Resistance levels: 1.3700, 1.3776, 1.3855

From the point of view of technical analysis, the trend on the USD/CAD currency pair has changed to bullish. The price is trading above the slips, but the price has hit a strong resistance level of 1.3700. The MACD indicator is in the positive zone, but the divergence indicates that the buyers are limited in their potential. Buy trades should be considered only after a breakout and a fixation above 1.3700. Sell deals are better to look for on the intraday time frames, but with a confirmation in the form of a reverse initiative or after a false breakout because the level has already been tested.

Alternative scenario: if the price breaks down and consolidates below the support level of 1.3386, the downtrend will likely resume.