As of Wednesday, the EUR/USD pair faced downward pressure from the strengthening US dollar, marking a notable shift in momentum for the week.
Possible technical scenarios:
According to the daily chart, the EUR/USD pair is currently putting the support at 1.0749 to the test. Should the pair consolidate below this level, the next target for decline lies at 1.0723 as indicated by a dotted line, with further support at 1.0672 should it break out the former.
Fundamental drivers of volatility:
This week, developments in both the euro area and the United States are relatively subdued. Market sentiment is predominantly shaped by expectations of potential interest rate cuts by the Federal Reserve later in the year. Additionally, investors closely monitor statements from Fed officials for insights into future monetary policy adjustments.
For instance, president and CEO of the Federal Reserve Bank of Minneapolis Neel Kashkari suggested on Tuesday that interest rates could remain unchanged throughout the year, echoing sentiments expressed by other central bank representatives in the preceding days.
Consequently, the trajectory of the US dollar, particularly its current uptrend, is expected to remain the primary driver of pair volatility.
Intraday technical outlook:
Reviewing the 4H chart of the EUR/USD pair, we observe consolidation beneath the level of 1.0749 which was broken out, signaling a potential path for the pair toward the aforementioned dotted support at 1.0723.
This week, the GBP/USD pair is on a downward trajectory ahead of the Bank of England meeting, amidst a broad strengthening of the US dollar.
Possible technical scenarios:
Judging by the unfolding situation on the daily chart of GBP/USD, we can see that the pair is consolidating below the key level of 1.2500, indicating a possible decline toward the nearest support level at 1.2430.
Fundamental drivers of volatility:
The focal point for GBP/USD this week centers on the Bank of England meeting, scheduled for Thursday. Market expectations lean towards the anticipation of two interest rate cuts by the British central bank later this year, although rates are expected to remain unchanged for now. In the meantime, the US is anticipated to implement at least one rate cut in September, although recent hawkish rhetoric from the central bank suggests a reluctance to tighten monetary policy. For instance, on Tuesday, Minneapolis Fed’s President and CEO Neel Kashkari suggested the Fed might maintain interest rates at current levels throughout the year.
Against this backdrop, the pound may weaken against the dollar, exerting continued downward pressure on the GBP/USD pair.
Intraday technical picture:
Zooming in on the 4H chart of the GBP/USD pair, we observe a consistent decline in the pair from the resistance level of 1.2500. This evidences the likelihood of a movement toward the support level at 1.2430.
Since the start of the week, the USD/JPY pair has been on an upward trajectory, driven by a strengthening US dollar and a weakened yen, despite Tokyo's efforts to stabilize the exchange rate.
Possible technical scenarios:
Based on the daily chart, the USD/JPY price surpassed the 154.83 level. Consolidation above this level and the psychological threshold of 155 yen per dollar could propel the pair toward the resistance at 157.10.
Fundamental drivers of volatility:
Although unconfirmed reports of Japanese currency interventions briefly bolstered the yen last week, the US dollar's resurgence this week has reinstated upward momentum for the USD/JPY pair. The primary driving force behind this trend remains the significant interest rate differential between the US and Japan, exerting continued pressure on the yen.
Despite ongoing warnings of potential market interventions from Japanese authorities, including the Bank of Japan's readiness to take monetary policy measures to curb the currency's depreciation, the impact of such interventions is expected to be short-lived amidst rate divergence, maintaining the dominance of the strong dollar over the USD/JPY pair.
Intraday technical picture:
As evidenced by the 4H chart of the USD/JPY pair, the systematic ascent of the pair above the 154.83 level indicates a pathway toward the 157.10 level. That being said, the looming threat of currency interventions may lead to a downward price correction.
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