During the initial half of the week, the news environment remains relatively calm, leading to sideways consolidation in the EUR/USD pair. Traders are awaiting data from the United States, which has the potential to reshape expectations regarding future actions by the Federal Reserve in terms of monetary policy.
Possible technical scenarios:
Judging by the look of the unfolding situation on the daily chart, EUR/USD is consolidating within the range between 1.0888 and 1.000. Within this range, the pair has equal technical probabilities of reaching both support and resistance levels.
Fundamental drivers of volatility:
The primary driver affecting the pair's dynamics this week, particularly on Thursday at 1:30 p.m. (GMT), will be inflation data for December in the United States. These statistics could significantly impact US dollar fluctuations if they deviate notably from expectations. A lower inflation figure might revive market expectations of an imminent interest rate cut, potentially weakening the dollar and providing support for EUR/USD.
The core consumer price index is anticipated to remain steady at 0.3% month-over-month, while year-over-year, it is expected to decrease from 4.0% to 3.8%.
In addition, the Consumer Price Index is forecasted to rise from 0.1% month-over-month to 0.2%, and from 3.1% to 3.2% year-over-year.
Intraday technical picture:
According to the 4H chart of EUR/USD, the pair's dynamics appear uncertain. The reaction of the US dollar to inflation data could potentially propel the pair either toward the resistance at 1.000 or back to the support at 1.0888.
The pound is currently hovering near five-month highs; however, market expectations suggest that the potential for the Federal Reserve to ease monetary policy precedes a rate cut by the Bank of England. If this alignment persists after this week's US inflation data, the GBP/USD pair may experience continued upward movement.
Possible technical scenarios:
The GBP/USD pair is currently consolidating within the range between 1.2656 and 1.2792, creating an atmosphere of uncertainty. Within this range, the quotes can shift towards either boundary.
Fundamental drivers of volatility:
On Thursday at 1:30 p.m. (GMT), the release of US inflation data for December may significantly influence US dollar volatility if it deviates notably from forecasts. The Core Consumer Price Index is predicted to remain steady at 0.3% month-over-month, while year-over-year, a decline from 4.0% to 3.8% is expected.
Aside from that, the Consumer Price Index is anticipated to rise from 0.1% month-over-month to 0.2%, and from 3.1% to 3.2% year-over-year.
On Friday at 7:00 a.m. (GMT), UK GDP data for November could impact the pound movement in the pair. Monthly forecasts indicate a growth of 0.2%, contrasting with the previous figure of -0.3%. GDP YoY is expected to grow by 0.1%, compared to the previous growth of 0.3%.
Intraday technical picture:
As shown by the 4H chart of the GBP/USD pair, the local trading range is currently confined between the highs and lows of Tuesday's trading session. Until the news is released, the price is likely to continue consolidating within this range.
The USD/JPY pair has experienced an increase this week, propelled by yen weakness and cautious growth in the US dollar. Despite the Bank of Japan maintaining an ultra-soft monetary policy and rhetoric on the matter, the price has the potential for additional growth, subject to correction by a decline in the US dollar against a basket of currencies.
Possible technical scenarios:
As we can see on the daily chart, the USD/JPY pair has reached the resistance within the sideways range between 143.39 and 145.21. If 145.21 fails to stop the price, there is a possibility of continued growth towards the level of 146.37. The pair may reverse within the indicated corridor if this scenario doesn't play out.
Fundamental drivers of volatility:
This week, no catalysts are anticipated from the Bank of Japan that could influence the dynamics of the yen. Against this backdrop, attention will be directed towards US data, which has the potential to impact pair volatility.
On Thursday, at 1:30 p.m. (GMT), December inflation data for the United States is slated for release. Forecasts indicate the core consumer price index to remain steady at 0.3% month-over-month, with an annual decline from 4.0% to 3.8%.
Aside from that, estimates suggest an increase in the Consumer Price Index from 0.1% to 0.2% month-over-month and a year-over-year rise from 3.1% to 3.2%.
Intraday technical picture:
Based on the look of things on the 4H chart, the USD/JPY pair is putting the strength of the resistance strength at 145.21 to test. The local price dynamics hinge on whether quotes can consolidate above this level. In the event of a false breakout, the price may retreat to the support at 143.39. In the meantime, the immediate growth target is the January 5 high.
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