This week, the EUR/USD pair experienced a decline in response to statements made by the European Central Bank regarding the likely end of the cycle of rate hikes. A further factor that put pressure on the price was the strengthening of the US currency.
Possible technical scenarios:
In the daily chart of EUR/USD, it's evident that the pair has exited the tight range between 1.0707 and 1.0808 downward. Presently, the decline in price has halted at the May 31 lows, which leaves room for a potential rebound from the current levels. However, there is also the possibility of the price traveling towards the support at 1.0592.
Fundamental drivers of volatility:
Investors' hopes that the Federal Reserve will take another pause in interest rate hikes at its September meeting have been bolstered by inflation and retail sales statistics released this week in the United States. However, forecasters are calling for still another hike in November, lending strength to the US dollar.
The European Central Bank raised interest rates abruptly on Thursday, sending the euro tumbling but signaling that this was likely the last step in a tightening cycle.
Intraday technical picture:
As we can see in the 4H chart of the EUR/USD pair, there is potential for an upward price reversal following yesterday's decline, which could bring the quotes back to the resistance at 1.0707 marked with dotted lines. The subsequent course of the pair upon reaching this level will hinge on whether the price reverses downwards or manages to break out 1.0707 and consolidate higher.
As part of an ongoing downward trend, the pair GBP/USD was trading under pressure this week as a result of the growing value of the US dollar.
Possible technical scenarios:
Judging by the unfolding situation on the daily chart, the GBP/USD quotes have reached the support at 1.2410. Should this level hold, there is potential for a price rebound toward the nearby resistance at 1.2525 marked with dotted lines. Consolidation below the 1.2410 level is another possible outcome, which might lead to a decline toward the 1.2323 level.
Fundamental drivers of volatility:
This week's movement in the GBP/USD pair has been driven primarily by the strengthening of the US currency. Retail sales in the United States rose 0.6% in August, beating analysts' estimates of a 0.2% increase. This helped push the dollar index to a six-month high.
The market is anticipating the upcoming Federal Reserve meeting, during which the rate is widely predicted to remain unchanged. Expectations that interest rates will be hiked again for this cycle in November, though, are helping the dollar's advance.
Intraday technical picture:
As evidenced by the 4H chart of the GBP/USD pair, we observe a price rebound occurring at the 1.2410 level, which locally sets the stage for potential ongoing recovery. Meanwhile, the resistance at 1.2525 marked with dotted lines serves as the target.
As the value of the US dollar has increased, the USD/JPY currency pair has been trading near its September highs. There is still some uncertainty about whether or not the yen will continue to strengthen, which is technically possible given that its weakening has brought it near the levels from which the Bank of Japan intervened the year before.
Possible technical scenarios:
As demonstrated by the daily chart, the USD/JPY pair has consolidated above the support at 146.93 but has not yet surpassed the highs recorded on September 5. If it successfully consolidates above this level, the next growth target would be the 150 yen per dollar threshold.
Fundamental drivers of volatility:
The strengthening of the US dollar is putting pressure on the already weak yen, and fears of intervention, either rhetorical or real, from the Bank of Japan are causing the USD/JPY pair to balance between these two opposing forces.
Following this week's US macroeconomic news, market players have come to the conclusion that the Fed will not hike interest rates at their meeting next week, extending the current hold until their meeting in November. In this context, the US dollar continues to strengthen while the Japanese yen remains weak because of the Bank of Japan's ultra-loose monetary policy.
Intraday technical picture:
According to the 4H chart of the USD/JPY pair, the trading range spans from the support at 145.86 marked with dotted lines to the resistance level at 147.79. Currently, the strength of the upper boundary is being put to the test. A successful breakout and consolidation above this level would pave the way for the price to reach 150.00. Conversely, we may anticipate a potential reversal and a decline in the pair.
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