The EUR/USD pair is consolidating at the start of the week as markets await potential volatility catalysts from the US.
Possible technical scenarios:
The EUR/USD pair has settled below the 1.1064 level, leaving some room for a move towards the support at 1.1001. Alternatively, a rise and consolidation above the 1.1064 level could pave the way for the pair to reach the resistance at 1.1138.
Fundamental drivers of volatility:
This week, the EUR/USD pair's movements will be largely influenced by the dollar, as no significant macroeconomic events are expected from the eurozone.
On Tuesday, data from the Institute for Supply Management (ISM) indicated that US manufacturing volumes remain subdued despite a slight improvement in August, which has pressured the dollar.
Investors will also focus on the US employment report, due on Friday. The expected increase in August payrolls is 165,000, down from 114,000 in July. Whether the actual data meets or diverges from expectations will impact the likelihood of the Fed adjusting interest rates in September.
Intraday technical picture:
On the 4H EUR/USD chart, a pattern of successively lower highs suggests further potential price weakness within the range between 1.1001 and 1.1064 range.
The GBP/USD pair began September on a lower note, likely due to profit-taking after its August rally.
Potential technical scenarios:
As evidenced by the daily chart, the GBP/USD pair has consolidated below the 1.3141 level, creating a path for a potential move toward 1.3044 and 1.2989.
Fundamental drivers of volatility:
The pound sterling displayed significant strength in August 2024, gaining 2.13% and achieving its best monthly performance since November 2023. However, it weakened against the US dollar at the start of September, partly due to profit-taking.
The primary factor supporting the pound is traders' expectations that UK interest rates will remain elevated for a longer period compared to the eurozone or the US.
This is driven by strong economic growth forecasts for the second half of the year, though at a slower pace than the recovery seen in early 2024. The pair's performance will be closely tied to US data this week, with the key event being the employment report release on Friday.
Intraday technical analysis:
According to the 4H GBP/USD chart, the pair has dropped below the 1.3141 level, leaving room for further movement toward support at 1.3044 marked with dotted lines. A breakout of this level could lead to a decline toward 1.2989.
The Japanese yen has been gaining strength for the second consecutive day, driven by risk aversion and a slight weakening of the American dollar.
Possible technical scenarios:
Judging by the unfolding situatiom on the daily chart, the USD/JPY pair has hit the support level of 145.21. If this support is broken out, the decline could extend to the next target at 143.39. Conversely, if the pair recovers, the growth targets would be the levels of 146.37 and 148.80.
Fundamental drivers of volatility:
The yen's strength against the US dollar on Wednesday was fueled by a broader increase in demand for safe-haven assets. The yen's rise was primarily triggered by a sharp drop in US stock markets the previous session, driven by disappointing US manufacturing data that raised concerns about a potential soft landing for the US economy.
By week's end, the pair’s movement could be influenced by the US dollar's reaction to the upcoming employment report, which will impact expectations for potential Federal Reserve interest rate cuts this month.
Intraday technical picture:
Judging from the unfolding situation on the 4H chart, the USD/JPY pair is testing the support level of 145.21, which leaves room for further decline within the range between 143.39 and 145.21.
The USD/CAD pair is recovering in early September. That being said, US and Canadian labor market data this week, along with the Bank of Canada decision, may correct the price direction.
Possible technical scenarios:
The daily chart shows that USD/CAD is trying to consolidate above the level of 1.3544. If successful, the growth will continue to the resistance of 1.3605. Otherwise, the pair may fall to the support of 1.3439.
Fundamental drivers of volatility:
The Canadian dollar is in the spotlight this week with several pivotal events that could notably influence its value.
On Wednesday at 1:45 p.m. GMT, the Bank of Canada is expected to announce its interest rate decision, with expectations pointing to a reduction from the current 4.50% to 4.25%. The accompanying statement, released simultaneously, will offer insights into the reasons behind the rate adjustment and the economic factors driving the decision.
Following this, the Bank of Canada’s press conference at 2:30 p.m. GMT will provide further details on the anticipated direction of monetary policy. Comments and forecasts from this briefing could significantly affect the Canadian dollar’s volatility.
On Friday at 12:30 p.m. GMT, the Canadian Labor Market report will be released. A rise of 25.6 thousand jobs is anticipated, a notable improvement from the previous decline of -2.8 thousand. However, the unemployment rate is expected to increase from 6.4% to 6.5%.
Intraday technical picture:
On the 4H USD/CAD chart, the pair is currently trading at 1.3544. This level has yet to show a clear direction for consolidation, meaning that both upward and downward price movements remain possible.
On Wednesday, gold prices continued to decline for the fourth consecutive session following the precious metal's record high set in August.
Possible technical scenarios:
As we can see on the daily XAU/USD chart, gold prices have retreated from the resistance level of 2542.00 and have reached the mirror support level of 2430.88. From this point, prices may either rebound and begin to recover or continue their decline. A breakout of the 2430.88 support level and consolidation below could lead to a further decline toward the next support level.
Fundamental drivers of volatility:
Gold prices fell to a two-week low on Wednesday, driven by a sharp downturn in stock markets which led to a rush to cover margin calls, thereby increasing pressure on gold.
The upcoming release of US non-farm payroll data later in the week is also adding pressure. The volatility of the US dollar, with which gold has an inverse relationship, will likely influence gold’s direction.
Intraday technical picture:
According to the 4H XAU/USD chart, it remains uncertain whether the support level of 2430.88 will hold or if prices will consolidate below it. The market is at a crossroads, with potential for either a recovery toward the 2542.00 level or a decline to the support at 2430.88.
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