The EUR/USD pair has seen an impressive upward trend over the past five trading sessions, raising anticipation about its future trajectory, depending on the response of the US currency to this week's data.
Possible technical scenarios:
The EUR/USD pair is currently putting the strength of resistance at 1.0801 to the test. Should it consolidate above this level, it could pave the way for further advancement toward 1.0888. Alternatively, a gradual retreat to the support at 1.0801 is likely.
Fundamental drivers of volatility:
Market sentiment has favored the EUR/USD pair since the week's commencement, buoyed by a cautious weakening of the US dollar. Investors are increasingly tempering expectations regarding the timing and magnitude of potential rate cuts by the Fed. Presently, there is a prevailing assumption among market players that the Fed may implement rate cuts totaling around 90 basis points this year.
The release of the FOMC minutes today at 7:00 p.m. (GMT) is poised to offer further clarity on the future trajectory of US interest rates. This event could potentially heighten volatility in the EUR/USD pair, particularly if the document's content has a significant impact on market expectations.
Intraday technical picture:
Judging by the unfolding situation on the 4H chart of the EUR/USD pair, it is unclear whether a breakout above 1.0801 will be true or false. That being said, the reaction of the US dollar to the Fed minutes later today is likely to provide clarity, allowing the pair to establish its stance relative to this horizontal level.
The GBP/USD pair finds support in the weakening US dollar, yet the landscape could swiftly shift pending US data releases that could reshape market sentiment regarding the Fed's future policy direction.
Potential technical scenarios:
On the daily chart of GBP/USD, the pair is putting the strength of the resistance level at 1.2656 to the test. A consolidation above this level could propel prices toward the next target at 1.2792. Otherwise, the pair may return to the support level at 1.2525.
Fundamental drivers of volatility:
This week's pound recovery isn't solely attributed to the US dollar's decline. Anticipation surrounds the upcoming release of UK PMI data on Thursday, which could position the UK favorably in comparison to both the euro area and the US.
Market sentiment is bullish on the pound, evidenced by an increase in medium-term bullish positions. Speculative positioning on sterling rose to $3.971 billion in the week ending February 13, nearing the nine-year high set last July, as per weekly data from the Commodity Futures Trading Commission (CFTC).
Leveraged funds, including hedge funds and money managers, have significantly increased their long sterling positions since December, backing the pound's ascent since October.
A pivotal event for volatility today at 7:00 p.m. (GMT) is the release of the FOMC minutes, expected to provide clarity on the US rate outlook and potentially recalibrate the direction of the US currency within the pair.
Intraday technical picture:
The 4H chart of GBP/USD demonstrates a pullback to the support area between 1.2608 and 1.2656. Given the possibility of heightened dollar volatility today, the pair's direction could be affected in either direction from this point.
The AUD/USD pair continues its ascent within the green area, buoyed by the ongoing weakness in the American currency.
Possible technical scenarios:
As evidenced by the daily chart, AUD/USD is currently consolidating above the critical level of 0.6541, with sights set on reaching 0.6582. From this point, the pair could either rally further, opening the path towards the next resistance at 0.6619, or retreat back to the support at 0.6541 should the US dollar regain strength.
Fundamental drivers of volatility:
The recent upswing in the pair is primarily attributed to the faltering US dollar, with Australian data, although present, failing to ignite significant volatility.
Minutes from the Reserve Bank of Australia's recent meeting indicated a contemplation of a quarter-percent interest rate hike, though the decision was ultimately made to maintain steady rates, buoyed by positive strides in inflation control.
Market sentiment remains confident in the RBA's stance, forecasting only a modest easing of 38 basis points throughout 2024, potentially commencing in the latter half of the year, with the first rate cut speculated no sooner than August or September.
The impending release of the FOMC minutes at 7:00 p.m. (GMT) on Wednesday holds the potential to offer clarity on the US rate outlook, possibly intensifying US dollar volatility should it prompt adjustments in market expectations. Traders are presently pricing in a Fed rate cut exceeding 90 basis points for the year.
Intraday technical picture:
According to the 4H chart of the AUD/USD pair, the pair finds itself at a pivotal juncture, consolidating within the range between 0.6541 and 0.6582. With the looming release of the Fed minutes on Wednesday, the pair's trajectory could be influenced in either direction amid potential fluctuations in US dollar volatility.
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