The Analytical Overview of the Main Currency Pairs on 2023.01.26

The EUR/USD currency pair

• Prev Open: 1.0883
• Prev Close: 1.0914
• % chg. over the last day: +0.28 %

According to the latest Ifo report, the German economy is starting the new year with more confidence. The Ifo Business Climate Index rose to 90.2 points in January, up from 88.6 points in December. The latest official forecast for the German economy is also more optimistic, with the government forecasting growth of 0.2% this year compared to the previous forecast of a 0.4% contraction. Markets expect the ECB to raise interest rates by 50 basis points next week and hold another 50 bps hike at the March meeting.

• Support levels: 1.0855, 1.0834, 1.0801, 1.0781, 1.0710, 1.0650, 1.0597, 1.0535
• Resistance levels: 1.0926

The trend on the EUR/USD currency pair on the hourly time frame is still bullish. The price seeks to test liquidity above 1.0926. The MACD indicator is positive again, but signs of divergence persist. There is buying pressure inside the day, but it is weak. Under such market conditions, buy trades are best considered from the support level 1.0855 with confirmation in the form of a false breakdown on intraday time frames. Selling can be considered from the resistance level of 1.0926, but better with a confirmation in the form of a reverse initiative or after a false breakdown.

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

• – US Core Durable Goods Orders (m/m) at 15:30 (GMT+2);
• – US GDP (q/q) at 15:30 (GMT+2);
• – US Initial Jobless Claims (w/w) at 15:30 (GMT+2);
• – US New Home Sales (m/m) at 17:00 (GMT+2).

The GBP/USD currency pair

• Prev Open: 1.2326
• Prev Close: 1.2400
• % chg. over the last day: +0.60 %

Investors are betting that the Bank of England will reverse course and cut its key interest rate later this year to support the weakening economy. For now, rates are expected to rise next month before hitting a high of 4.5% in the summer. The reassessment comes after some economic data points to slower growth and lower inflation. The market is beginning to question whether the UK Central Bank will be able to hold rates at such high levels for long.

• Support levels: 1.2292, 1.2263, 1.2220, 1.2080, 1.2000, 1.1928, 1.1875, 1.1684
• Resistance levels: 1.2413, 1.2446, 1.2519

From the technical point of view, the trend on the GBP/USD currency pair on the hourly time frame is still bullish. The MACD indicator has become positive, while there is still buying pressure on the lower time frames. Under such market conditions, buy trades are better to look for on intraday time frames from the support level of 1.2292, but with confirmation. Sell trades are better to look for from the resistance level of 1.2413, but it is also better with a confirmation in the form of a reverse initiative because a false break-out has already occurred.

Alternative scenario: if the price breaks down through the 1.2263 support level and fixes above it, the downtrend will likely resume.

The USD/JPY currency pair

• Prev Open: 130.16
• Prev Close: 129.58
• % chg. over the last day: -0.44 %

Given the rise in carry trade (a strategy to profit in the currency market by interest rates difference) behind the FOMC's aggressive tightening cycle, analysts predict that the yen will benefit from a drop in risk appetite. Traders also tend to believe that a decline in US GDP today and the inflation indicator PCE tomorrow may give impulse growth to the USD/JPY quotes at the expense of the dollar index decline.

• Support levels: 129.04, 128.16, 127.53, 126.19
• Resistance levels: 130.17, 131.10, 130.61, 131.58, 132.37, 132.95, 133.23

From the technical point of view, the medium-term trend on the currency pair USD/JPY is still bearish. The price tested liquidity below the support level of 129.04. The MACD indicator is in the negative zone, but sellers' pressure is weak. It is best to look for buy deals now from the support level of 129.04, but only with confirmation on the lower time frames. Sell deals can be searched from the resistance level of 130.17 on the condition of the reverse reaction.

Alternative scenario: If the price fixes above the resistance level of 131.58, the uptrend will be renewed with a high probability.

The USD/CAD currency pair

• Prev Open: 1.3368
• Prev Close: 1.3390
• % chg. over the last day: +0.16 %

Yesterday, the Bank of Canada raised its interest rate by 0.25%, from 4.25% to 4.50%. The accompanying statement said that if economic developments are broadly in line with the MPR forecast, the Governing Council expects to keep the discount rate at current levels. In other words, if inflation in the country doesn't grow, the Bank of Canada has already finished its tightening cycle. But analysts believe that given the high exposure of Canadian household debt and vulnerability to rising interest rates due to the structure of the mortgage market, the economy and inflation could slow faster than the Bank of Canada is currently forecasting. Consequently, the next step could be an interest rate cut with a possible first easing as early as the end of the third quarter.

• Support levels: 1.3376, 1.3346, 1.3212
• Resistance levels: 1.3413, 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 became positive, and buyers prevail within the day. The price continues to form a wide balance with 1.3346-1.3413 boundaries, testing liquidity on both sides. Under such market conditions, sell trades could be considered from a resistance level of 1.3413 or better, 1.3445, but with additional confirmation in the form of reverse initiative. Buy trades should be considered from the support level of 1.3345, but only with confirmation in the form of a false breakdown and short targets.

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