On Tuesday, the US dollar faced pressure, lending support to EUR/USD, following a weak business activity report indicating a contraction to four-month lows in April, reigniting hopes for a Fed rate cut.
Possible technical scenarios:
As we can see on the daily chart, the EUR/USD pair is nearing the resistance of the range between 1.0616 and 1.0723 marked with two dotted lines. An upward exit could signal a further uptrend toward 1.0812. Conversely, a decline within this range remains a likely alternative scenario.
Fundamental drivers of volatility:
Presently, market sentiment leans towards an earlier ECB rate cut compared to the initiation of monetary policy easing in the United States. This dynamic favors medium-term weakness in the euro and a strengthened dollar.
ECB members have underscored the necessity for multiple interest rate reductions this year. While the President of the European Central Bank Christine Lagarde hinted at a potential deposit rate cut from its record high of 4% in June, the central bank has kept its options open.
Wednesday's 12:30 p.m. (GMT) report on US durable goods orders for March may sway the dollar's trajectory in the pair. Core orders are expected to remain steady at 0.3% month-over-month, while durable goods orders are anticipated to rise by 2.5%, up from the previous growth of 1.3%.
Intraday technical picture:
Judging by the unfolding situation on the 4H chart of the EUR/USD within the 1.0616 to 1.0723 range, the pair has entered a downward correction phase. The intermediate level of 1.0672 may act as support; if it holds, further upward movement in the pair could be anticipated.
The GBP/USD pair found support this week due to the weakening US dollar. Whether this trend persists hinges on forthcoming data releases from the United States.
Potential technical scenarios:
As evidenced by the daily chart, the GBP/USD pair is currently testing the strength of the resistance of the range between 1.2306 and 1.2430. Should the price consolidate above the 1.2430 level, the next target for upward movement would be at the horizontal level of 1.2500. If this scenario doesn’t play out, a decline within the 1.2306 to 1.2430 is possible.
Fundamental drivers of volatility:
The pair experienced a boost on Tuesday following softer-than-anticipated US data, potentially accelerating the Federal Reserve's policy easing timeline.
However, the strength of the sterling was tempered by dovish remarks from Bank of England policymakers, who foresee inflation easing to its 2% target and remaining there. Meanwhile, speculation surrounding a summer interest rate cut by the Bank of England has diminished, with Bank of England Chief Economist Huw Pill affirming the necessity for "constrictionary" monetary policy.
Intraday technical picture:
Reviewing the 4H chart of the GBP/USD pair, the sustainability of the 1.2430 level as support remains uncertain. If maintained, further upward momentum toward the 1.2500 resistance level could be anticipated.
The USD/JPY pair remains in consolidation below the significant psychological threshold of 155 yen per dollar. On one hand, the yen faces downward pressure due to the interest rate differential between the Federal Reserve and the Bank of Japan, while on the other hand, growth is limited by apprehensions regarding potential foreign exchange interventions by Japanese authorities.
Possible technical scenarios:
The daily chart shows that the USD/JPY price sits below the resistance level of 154.83. A technical breakout of this level would pave the way for the pair toward the next psychological milestone of 156 yen per dollar. Conversely, in the event of a decline, support can be anticipated around the 154 yen per dollar mark.
Fundamental drivers of volatility:
The rhetoric and policies of the Bank of Japan hold paramount importance for the USD/JPY pair presently, as their decisions could either bolster or weaken the yen further.
The outcome of the Bank of Japan meeting scheduled for Friday will be closely monitored by market players for insights into the tone of announcements and the likelihood of future interest rate adjustments.
Additionally, at 12:30 p.m. (GMT) on Wednesday, the dollar may experience localized reactions to the release of the US durable goods orders report for March, with a forecasted growth of 2.5% compared to the previous 1.3% increase.
Intraday technical picture:
According to the 4H chart of the USD/JPY pair, the resistance level at 154.83 is being tested, albeit with false breakouts. In the event of a price reversal, the nearest local support is expected around the psychological level of 154 yen per dollar.
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