The EUR/USD pair recovered amid a weakening US dollar. The US currency faced downward pressure due to an improved risk appetite following robust quarterly company reports.
Possible technical scenarios:
By the week's end, the pair rebounded from earlier losses, reaching the resistance of the corridor between 1.0801 and 1.0888. From a technical perspective, there is potential for both a reversal downward and an attempt to continue increasing after consolidating above 1.0888.
Fundamental drivers of volatility:
Earlier in the week, the US dollar strengthened following statements from the Fed, signaling no expectation of a rate cut in March. However, the currency later lost ground as investors persisted in speculating that the US central bank was nearing an interest rate cut, despite Fed Chair Jerome Powell expressing the unlikelihood of that move in March.
The week is ending with the release of the US labor market report, scheduled for today at 1:30 p.m. (GMT). This report traditionally contributes to heightened volatility in the US currency and may provide additional insights into the state of the US economy. Strong data could further diminish expectations for a rate cut in March.
The projected change in nonfarm payrolls is 187 thousand people, down from the previous figure of 216 thousand, accompanied by an increase in unemployment from 3.7% to 3.8%. Additionally, it is anticipated that the annual growth in average hourly wages will remain at 4.1%, while the monthly rate is expected to decrease from 0.4% to 0.3%.
Intraday technical picture:
As we can see on the 4H chart of the EUR/USD, the price has reached the 1.0888 resistance, but it is yet unclear whether it will break out this level or reverse downward. The US dollar's reaction to today's jobs report is likely to provide clarity on the price position relative to the horizontal line and could lead to a change in the technical scenarios.
The GBP/USD pair found support in the decline of the US dollar, rebounding from weekly lows and trading in anticipation of the US labor market report.
Possible technical scenarios:
The technical landscape remains unchanged on the daily chart of GBP/USD. The pair demonstrated growth within the range between 1.2608 and 1.2792, with a limited room near its upper boundary. A surge in volatility triggered by news could prompt a test of the resistance at 1.2792 and a potential ascent to the 1.2846 level if the US dollar continues to weaken. An alternative scenario involves a downward reversal within the current corridor.
Fundamental drivers of volatility:
At the start of the year, market players anticipated signals from central banks indicating the commencement of interest rate cuts. That being said, on Wednesday, the Fed disappointed markets by making it clear that it has no intention of easing monetary policy in March.
On Thursday, investors received another discouraging signal from the Bank of England, which gave no hint of a rate cut and emphasized the need for more evidence of a sustained decline in price pressures before considering a policy change.
Despite these developments, markets still anticipate an initial move from the Fed in March, and the US labor market report at 1:30 p.m. (GMT) today will either reinforce or dispel those expectations.
Projections indicate stable annual average hourly wage growth at 4.1%, with monthly growth expected to decrease from 0.4% to 0.3%. Additionally, the change in non-farm payrolls is expected to be 187 thousand, compared to the previous value of 216 thousand. Unemployment is also anticipated to go up from 3.7% to 3.8%.
Intraday technical picture:
According to the 4H chart, the GBP/USD pair still has room to reach the resistance at 1.2792. Increased US dollar volatility in response to today's labor market report is likely to help the pair figure out its position around this level, providing further clarity on the direction ahead.
The USD/JPY pair experienced a decline towards the end of the week, influenced by the weakening US dollar. The decline in the American currency, driven by an improved risk appetite, may encounter new catalysts for volatility today.
Possible technical scenarios:
Judging by the unfolding situation on the daily chart, the USD/JPY pair is currently putting the strength of the support at 146.37 to the test. If this level holds, a rebound towards the resistance at 148.80 is possible. Otherwise, consolidation below this level could pave the way for the pair to reach the next support at 145.21.
Fundamental drivers of volatility:
The USD is on a downward trend at the end of this week, exerting pressure on the USD/JPY pair. While the Fed's meeting this week tempered expectations for a rate cut in March, market players still anticipate that macroeconomic data might cause the central bank to implement monetary easing sooner.
On Friday at 1:30 p.m. (GMT), the US labor market report for January is expected to be released, and stronger-than-expected data could affirm the Fed's cautious approach. Projections suggest stable annual average hourly wage growth at 4.1%, with monthly growth expected to decrease from 0.4% to 0.3%. The change in nonfarm payrolls is anticipated to be 187 thousand, down from 216 thousand in December, while the unemployment rate is expected to rise from 3.7% to 3.8%.
Intraday technical picture:
As evidenced by the 4H chart of the USD/JPY pair, the breakout of the 146.37 level appears to be a false signal, creating technical conditions for a potential recovery. That being said, a surge in volatility triggered by news events could have an impact on the direction and price targets.
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