This week sees a rebound in the EUR/USD pair, supported by the weakening US dollar, in anticipation of inflation data.
Possible technical scenarios:
Observing the daily chart, the EUR/USD pair has stabilized above the 1.0812 level, indicating ample room for movement toward the nearest resistance at 1.0881.
Fundamental drivers of volatility:
Tuesday's uptick in producer prices applied downward pressure on the US dollar. However, the pivotal factor influencing pair volatility will be today's release of US inflation figures for April, offering insights into potential interest rate adjustments by the Fed this year.
Data is scheduled for release at 1:30 p.m. (GMT). Projections for the Core Consumer Price Index anticipate a monthly increase of 0.3% compared to the previous 0.4%, with an annual decline from 3.8% to 3.6%. Aside from that, the Consumer Price Index is expected to dip from 3.5% to 3.4% annually, remaining steady month-over-month at 0.4%. Simultaneously, US retail sales data for April is due, with expectations of a 0.4% growth compared to the previous 0.7% increase.
Intraday technical picture:
As evidenced by the 4H chart of the EUR/USD pair, the price is recovering within an uptrend. Following consolidation above the 1.0812 level, the quotes in the channel price have room for potential movement, at least toward the 1.0881 resistance level.
The GBP/USD pair extended its rally for the fifth consecutive session, supported by a weakened US dollar and upbeat UK wage data released on Tuesday.
Potential technical scenarios:
Analyzing the daily chart of GBP/USD, the price surged towards the resistance level within the range between 1.2500 and 1.2608. A breakout of the 1.2608 level, followed by consolidation above it, could pave the way for further upward movement towards the next target at 1.2656.
Fundamental drivers of volatility:
This week, the primary factors influencing volatility are the US inflation reports. Tuesday's release of the producer price index exhibited a mixed tone, directing attention toward forthcoming consumer price data.
A stronger-than-expected inflation reading might temper expectations of Fed monetary policy easing, bolstering the dollar's position, while a slowdown in inflation would suggest potential rate cuts in September, potentially weakening the dollar.
Projections for the Core Consumer Price Index foresee a monthly increase of 0.3% compared to the previous 0.4%, with an annual decrease from 3.8% to 3.6%. Concurrently, the consumer price index is anticipated to drop from 3.5% to 3.4% annually, while maintaining a monthly stability at 0.4%.
Intraday technical picture:
Judging by the unfolding situation on the 4H chart of the GBP/USD pair, we can see that the strength of the resistance level at 1.2608 is being put to the test. The pair's positioning relative to this boundary will likely be influenced by the dollar's reaction to today's news.
The USD/JPY pair continues to be influenced by a weakened yen, driven by the disparity between the interest rates set by the Fed and the Bank of Japan. Locally, this dynamic could be adjusted by fluctuations in the dollar, particularly in response to inflation data.
Possible technical scenarios:
Examining the daily chart, the USD/JPY pair is currently trading within the range between 154.83 and 157.10. Should the dollar's decline persist, the pair might retract towards its support level. However, consolidation above the 157.10 level raises the likelihood of currency intervention from Tokyo.
Fundamental drivers of volatility:
This week, the pair's dynamics may be shaped by the US currency's response to the release of the US consumer price index report at 1:30 p.m. (GMT).
Projections for the Core Consumer Price Index anticipate a month-over-month increase of 0.3% compared to the previous 0.4%, with a year-over-year decrease from 3.8% to 3.6%. Meanwhile, the Consumer Price Index is expected to decline from 3.5% to 3.4% annually, while maintaining monthly stability at 0.4%.
Rising inflation could diminish expectations of a Fed rate cut, lending support to the dollar. However, it's important to note that a significant weakening of the yen might prompt Japanese authorities to intervene in the market to bolster their currency.
Intraday technical picture:
According to the 4H chart of the USD/JPY pair, a local decline in price is evident. That being said, the pair currently holds above the psychological support level of 155 yen per dollar. Should this support level falter, a decline towards the 154.83 level becomes a possibility.
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