EUR/USD pair has recovered but remains within a symmetrical triangle, where it may now face a decline.
Possible technical scenarios:
As we can see on the daily chart of EUR/USD, the pair has formed a symmetrical triangle. The price is attempting to turn down from the resistance near 1.0478, which could lead to a pullback to the area around 1.0271. However, it is important to note that the price could exit this figure in either direction. The exit to the upside would open the way for the pair to move toward 1.0672.
Fundamental drivers of volatility:
The EUR/USD pair fell on Tuesday under pressure from the rising US dollar. The US currency is supported by statements from Fed representatives about maintaining the current rate level (4.25%-4.50%) for a longer period. Fed officials Michelle Bowman and Patrick Harker emphasized the need for a stable policy to further control inflation.
Investors are also focused on the FOMC minutes on Wednesday, hoping to gain more clarity on the future monetary policy outlook.
Meanwhile, the euro remains under pressure due to expectations of a potential ECB rate cut and concerns over possible US tariffs on German cars. These factors limit the upside potential for EUR/USD, keeping the pair vulnerable.
Intraday technical picture:
Judging by the unfolding situation on the 4H chart of EUR/USD, an unsuccessful attempt to consolidate above 1.0478 creates the possibility for a local decline to support at 1.0344, its breakout, and further weakening in the pair.
The GBP/USD pair has been trading in the green area for the third consecutive week, as the pound is supported by strong data from the UK.
Possible technical scenarios:
On the daily chart, GBP/USD is putting the 1.2608 level to the test. If the price consolidates above this level and the 1.2656 horizontal line, the pair could continue its upward movement toward the target of 1.2792.
Fundamental drivers of volatility:
The pound sterling rose on Tuesday after the release of strong employment data in the UK. In December, the economy added 107 thousand jobs, significantly higher than expected, and the unemployment rate remained at 4.4%. Additionally, average earnings accelerated, which could increase inflation expectations and support higher interest rates.
However, the weak economic forecast from the Bank of England and the cautious rhetoric from its head, Andrew Bailey, are limiting the pound's growth.
Meanwhile, the US dollar remains strong, supported by expectations that the Fed will keep current interest rates for a longer period. The dollar also benefits from potential US trade tariffs and expectations for the upcoming FOMC minutes, which could provide more clarity on future policy.
The current balance of power in the GBP/USD pair is driven by strong data from the UK versus stable demand for the US dollar. Investors are closely watching the upcoming publication of the UK consumer price index and the FOMC minutes.
Intraday technical picture:
Based on what we see on the 4H chart of GBP/USD, the pair has reached the resistance of the ascending channel. If the price fails to exit it in an upward direction, it may pull back to the 1.2430 level.
The Japanese yen remains under pressure despite expectations of further rate hikes by the Bank of Japan this year. At the same time, the USD/JPY pair is slightly in the red at the beginning of the week.
Possible technical scenarios:
On the daily chart, the USD/JPY pair is approaching the support at 150.74 marked with a dotted line. If the price turns up from here, a recovery to the level of 154.83 is possible. This would form a double bottom reversal pattern, allowing the pair to continue its recovery toward the target of 157.10.
Fundamental drivers of volatility:
The narrowing yield differential between US and Japanese bonds is limiting the yen's weakening, but demand for the US dollar remains strong due to rising yields on US Treasury bonds.
Additional pressure on the yen comes from a decrease in interest in safe-haven assets, as optimism in the markets grows due to negotiations between the US and Russia regarding the situation in Ukraine. Meanwhile, strong Japanese GDP figures are fueling expectations for the central bank to tighten its monetary policy.
In the United States, mixed inflation data and weak retail sales are fueling expectations for the Fed to ease policy this fall. However, Fed officials have indicated that a cautious approach is necessary, creating uncertainty about the timing of any rate cuts.
Intraday technical picture:
A recovery from support at 150.74 marked with a dotted line could be the start of an upward reversal for the pair. The immediate target for growth in this scenario is 153.09, and if that is overcome, 154.83 would be the next level to watch.
The USD/CAD pair is cautiously recovering from last week's decline.
Possible technical scenarios:
On the daily chart, USD/CAD is trading in the lower portion of the range between 1.4116 and 1.4261, with some room for further movement down. After that, a reversal to the upside is plausible.
Fundamental drivers of volatility:
The USD/CAD pair has stabilized ahead of the publication of inflation data in Canada. The consumer price index (CPI) is expected to show moderate growth, and if the data comes in weaker than expected, this could put pressure on the Canadian dollar.
Additional pressure on the Canadian currency could stem from US trade policy, as Donald Trump continues to push through tariff measures, now targeting cars. Increased trade tensions typically support demand for the US dollar.
That being said, rising oil prices could limit the CAD’s weakening, as Canada is a major exporter of oil. The pair's dynamics will depend on the balance between economic data and external factors, including US trade policy and the situation in the oil market.
Intraday technical picture:
The 4H USD/CAD chart shows that the consolidation at the bottom of the range between 1.4116 and 1.4261 resembles the formation of a bear flag. If the pattern plays out, the price may fall below 1.4116 and consolidate below that level.
Oil prices are rising at the start of the week, but moderately, as the market still has preconditions for supply growth.
Possible technical scenarios:
On the daily Brent chart, the price has found support at the 73.87 level marked with a dotted line. If this support holds, a recovery to the 77.25 level is possible, forming a double bottom reversal pattern and paving the way for further recovery.
Fundamental drivers of volatility:
Oil prices have been rising following a drone attack on a Russian pipeline that carries about 1% of global crude supplies. This attack led to a 30% reduction in transit from Kazakhstan, with repairs expected to take up to two months. This event has weakened bearish sentiment in the market, especially after several weeks of falling prices.
That said, the potential for further oil price growth is limited by the prospect of increased supplies from OPEC+ and Russia. In December, OPEC members postponed plans to increase production until April due to weak demand and rising supply outside the cartel. Recent reports suggest that they do not plan to delay the production increase further, which creates expectations of an oversupply, putting pressure on prices in the long term.
The situation around peace talks on Ukraine, involving the US and Russia, also adds uncertainty. Successful talks could lead to Russian oil returning to legitimate markets, impacting the global supply-demand balance.
Intraday Technical Picture:
Given the unfolding situation on the 4H chart of Brent, the recovery within the range between 73.87 and 77.25 may continue if the price consolidates above 75.18. An alternative scenario, if the price consolidates below the support at 73.87, would be further weakening toward the 70.85 level.
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