The Analytical Overview of the Main Currency Pairs on 2023.01.25

The EUR/USD currency pair

• Prev Open: 1.0871
• Prev Close: 1.0887
• % chg. over the last day: +0.14 %

Eurozone manufacturing activity rose from 47.8 to 48.8 (a 5-month high). Service sector activity rose from 49.8 to 50.7 (a 6-month high). Eurozone composite business activity index showed 50.2 (December: 49.3). The increase in business activity was driven by technology (both IT services and equipment) as well as the healthcare and pharmaceuticals sectors, although manufacturing has also returned to growth territory. The resumption of manufacturing growth in this area comes as optimism continues to improve. The Eurozone is beginning to show economic resilience.

• Support levels: 1.0834, 1.0801, 1.0781, 1.0710, 1.0650, 1.0597, 1.0535, 1.0497, 1.0480
• Resistance levels: 1.0886, 1.0926

The trend on the EUR/USD currency pair on the hourly time frame is still bullish. A false breakout zone that formed a few days ago is now acting as resistance. The MACD indicator is positive again, but signs of divergence remain. During the day, there is buying pressure, but it is weak. Under such market conditions, buy trades are better to consider from the support level of 1.0834 with a confirmation in the form of a false breakdown on the 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.

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

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

The GBP/USD currency pair

• Prev Open: 1.2373
• Prev Close: 1.2338
• % chg. over the last day: -0.28 %

After December's impressive business data, markets were hoping for another encouraging report for January. But that did not happen. The UK service sector experienced its worst drop in business activity in two years, with manufacturing activity picking up slightly. The PMI report indicates that higher interest rates and lower consumer confidence are the key factors behind the lower activity. Against this macro data, the British pound lost some ground against the dollar yesterday.

• Support levels: 1.2292, 1.2263, 1.2220, 1.2080, 1.2000, 1.1928, 1.1875, 1.1684
• Resistance levels: 1.2383, 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, but the price is approaching the priority change level. The MACD indicator has become negative. At the same time, the divergence is already forming in the lower time frames. Under such market conditions, it is better to look for buy deals on intraday time frames from the support level of 1.2292 or 1.2220, but with confirmation. Sell trades are best sought from the resistance level of 1.2385 but also better with confirmation in the form of a reverse initiative.

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: 130.62
• Prev Close: 130.17
• % chg. over the last day: -0.35 %

The Japanese yen rose slightly against the US dollar on the back of a declining dollar due to good macroeconomic data. Manufacturing PMI remained at 48.9, unchanged from the previous month, while business activity in the service sector was at 52.4, up from 51.1. It should be noted that volatility in the USD/JPY currency pair is lower than usual this week due to the Lunar New Year holiday in China.

• Support levels: 129.73, 129.04, 128.16, 127.53, 126.19
• Resistance levels: 131.10, 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 is trading at the levels of the moving averages. Volatility is declining. The MACD indicator has become inactive, but the divergence is increasing. It is best to look for buy deals from the support level of 129.73 or 129.04, but only with a confirmation in the form of a false breakdown. Sell deals may be searched for from the resistance level of 131.11, provided that there is a 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: 1.3372
• % chg. over the last day: +0.03 %

The Bank of Canada is expected to raise its interest rate by 0.25% today to 4.5%. If that happens, it would be the eighth consecutive time the Bank has decided to raise the benchmark rate. It might be the last rate hike since rising rates always put negative pressure on economic growth, and Canada's numbers are already starting to slow. But much will depend on further data on inflation and the labor market. Canada has seen slow job growth in recent months, giving the impression that Canada may come out of the rate hike cycle sooner than the US.

• Support levels: 1.3346, 1.3212
• Resistance levels: 1.3382, 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 is in the negative zone, sellers dominate within the day, but the divergence increases. The price is forming a wide balance, with boundaries at 1.3346-1.3413. Under such market conditions, sell trades can be considered from the resistance level of 1.3413 or 1.3381, but with additional confirmation in the form of reverse initiative or false breakout. But trades should be considered from the support level of 1.3345, but only with a 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.

• – Canada BoC Interest Rate Decision at 17:00 (GMT+2);
• – Canada BoC Monetary Policy Report at 17:00 (GMT+2);
• – US Crude Oil Reserves (w/w) at 17:30 (GMT+2);
• – Canada BoC Press Conference at 18:00 (GMT+2).