The Analytical Overview of the Main Currency Pairs on 2023.01.23

The EUR/USD currency pair

• Prev Open: 1.0825
• Prev Close: 1.0854
• % chg. over the last day: +0.27 %

Last week, ECB President Christine Lagarde refuted all market expectations of a slowdown in interest rate hikes. The ECB is determined, so investors should expect at least two more rate hikes of 0.5%. The ECB will hold its next policy meeting on February 2. With the US tech giants now announcing a wave of layoffs one after another, it suggests that the US labor market is starting to fall, which will limit the US Federal Reserve's tightening policy. Therefore, right now, the European currency has better growth prospects than the dollar.

• Support levels: 1.0846, 1.0801, 1.0781, 1.0710, 1.0650, 1.0597, 1.0535, 1.0497, 1.0480
• Resistance levels: 1.0886

The EUR/USD currency pair trend on the hourly time frame is still bullish. The price is forming a wide price corridor and is trading above the levels of the moving averages. The MACD indicator has become positive, with signs of divergence persisting. There is some buying pressure inside the day, with the price trying to break the resistance level of 1.0886. Under such market conditions, buy trades are best considered from the support level of 1.0846 with confirmation on intraday time frames. Sell deals can be considered from the resistance level of 1.0886, but better with a confirmation in the form of a reverse initiative or a false breakout.

Alternative scenario: if the price breaks down through the support level of 1.0710 and fixes below it, the downtrend will likely resume.

• – Eurozone ECB President Lagarde Speaks at 19:45 (GMT+2).

The GBP/USD currency pair

• Prev Open: 1.2388
• Prev Close: 1.2396
• % chg. over the last day: +0.06 %

The UK economy faces many challenges: high inflation, falling production, retail sales, and unresolved issues around Brexit. The Bank of England is facing a dilemma as the economy is already in recession, and rising rates will create additional pressure. Economists believe the December strike will cause GDP to fall in the fourth quarter. Despite the dollar selling off, the British pound outlook looks much murkier than the euro.

• Support levels: 1.2300, 1.2220, 1.2080, 1.2000, 1.1928, 1.1875, 1.1684
• Resistance levels: 1.2435, 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 above the levels of the moving averages. The MACD indicator is in the positive zone, but the presence of divergence and the daily resistance is still limiting the further growth of quotes. Under such market conditions, it is better to look for buy trades on intraday time frames from the support level of 1.2300, but with confirmation. It is better to look for sell deals from the resistance level of 1.2435, but it is also better with a confirmation in the form of a false breakout, which is probably already formed.

Alternative scenario: if the price breaks down through the 1.2219 support level and fixes above it, the downtrend will likely resume.

The USD/JPY currency pair

• Prev Open: 128.40
• Prev Close: 129.55
• % chg. over the last day: +0.89 %

Inflation in Japan is at its highest level in four decades and twice the Bank of Japan's 2% target. Still, the Central Bank is in no hurry to make changes, continuing its ultra-soft monetary policy. Rising inflation in Japan makes it more likely that the central bank will reverse policy tightening in the spring. There will be a change in the governor of the Bank of Japan in April 2023, and all candidates for the new governor are committed to tighter monetary policy.

• Support levels: 128.67, 128.16, 127.53, 126.19
• Resistance levels: 130.61, 131.58, 132.37, 132.95, 133.23, 134.45, 135.88

From the technical point of view, the medium-term trend on the currency pair USD/JPY is still bearish. The price did not manage to consolidate above the priority change level, but within the day, buying pressure prevails, and the price is trading above the moving averages. The MACD indicator has become inactive. Buy trades are best sought from the support level of 128.67 or 128.16, but only with intraday confirmation. Sell deals can be searched from the resistance level of 130.61 under the condition of a reverse reaction or false breakout.

Alternative scenario: If the price fixes above the resistance level of 131.34, the uptrend will be renewed with a high probability.

• – Japan Monetary Policy Meeting Minutes at 01:50 (GMT+2).

The USD/CAD currency pair

• Prev Open: 1.3468
• Prev Close: 1.3373
• % chg. over the last day: -0.71 %

The Canadian dollar was unchanged against the US dollar last week. The Bank of Canada will hold its monetary policy meeting this week, when it is expected to raise its rate from 4.25% to 4.5%. Will this be the end of the Bank of Canada's tightening cycle? That will depend on inflation and labor market indicators. The last CPI report was softer, and the December Canadian employment report indicated that the labor market remains strong. Therefore, the likelihood of another 0.25% increase remains extremely high. Moreover, layoffs in the US are increasing investors' appetite for risky assets as the US Fed will be forced to pursue a more dovish policy. Given the rise in oil prices, this is a strong factor for the further strengthening of the Canadian dollar.

• Support levels: 1.3374, 1.3351, 1.3212
• Resistance levels: 1.3445, 1.3496, 1.3520, 1.3554, 1.3595, 1.3632

From the point of view of technical analysis, the trend on the USD/CAD currency pair is bearish. The MACD indicator is in the negative zone, and sellers dominate within the day. But the price has deviated strongly from the average lines, so a correction upwards is expected. Under such market conditions, sell trades can be considered from the resistance level of 1.3445, but with additional confirmation in the form of reverse initiative or change of the structure on the lower time frames. Buy trades should be considered from the support level of 1.3374 or 1.3351, but only with short targets and confirmation in the form of a false breakdown.

Alternative scenario: if the price breaks out and consolidates above the resistance level of 1.3513, the uptrend will likely resume.