By Wednesday, the EUR/USD saw a decline as the US dollar gained strength amidst anticipated hawkish rhetoric from the Federal Reserve.
Possible technical scenarios:
Examining the daily chart of EUR/USD reveals a downward trend following a reversal from the resistance within the range between 1.0616 and 1.0723, marked between two dotted lines. Even though there is enough room for movement till its resistance, price targets may be adjusted today in response to significant fluctuations in dollar volatility spurred by news events.
Fundamental drivers of volatility:
Wednesday marks Labor Day celebrations across euro area countries, with local stock exchanges closed for the day. The primary catalyst for volatility will be the Federal Reserve's announcement of the two-day meeting's results at 6:00 p.m. GMT. It is anticipated that the main interest rate will remain unchanged at 5.50%, alongside the release of the FOMC statement. Therefore, the market focus will be on remarks by the central bank's head, Jerome Powell, during the ensuing 6:30 p.m. GMT press conference.
The Fed is expected to maintain a cautious stance regarding the initiation of rate cuts, with hawkish statements likely to fuel further appreciation of the US dollar.
Notably, ahead of the Fed's decision, the American session on Wednesday will witness a flurry of news, potentially impacting dollar volatility in the pair. At 12:15 p.m. GMT, the ADP agency will release a report on changes in US non-farm employment for April, with expectations set at 179 thousand, down from 184 thousand in March. Subsequently, PMI indices in the industrial sector and a report on job vacancies in the JOLTS labor market for March will be released.
Intraday technical picture:
Judging by the unfolding situation on the 4H chart of the EUR/USD, price consolidation below the intermediate level of 1.0672 within the range between 1.0616 and 1.0723 marked with two dotted lines creates technical prerequisites for a decline toward 1.0616.
The GBP/USD pair hovers near one-week lows as market players exercise caution in anticipation of Wednesday's news-packed US trading session.
Possible technical scenarios:
As we can see on the daily chart, the GBP/USD pair is positioned at the 1.2500 level. Its consolidation above or below this threshold hinges on the prevailing direction of the dollar. Should the dollar appreciate, the price is likely to remain below 1.2500, with potential downward targets at 1.2430 and 1.2306.
Fundamental drivers of volatility:
With Wednesday marking the Labor Day weekend in the UK, the pair's performance will predominantly be influenced by developments concerning the US dollar, which is poised for an eventful day.
At 12:15 p.m. GMT, the ADP agency will release a report on changes in US non-agricultural employment for April, providing insights into Friday's Nonfarm Payrolls data. Projections suggest 179 thousand jobs added, down from 184 thousand in March. PMI indices in the industrial sector and a report on job vacancies in the JOLTS labor market for March will be disclosed later.
The highlight of the day, expected to affect dollar volatility significantly, will be the outcome of the two-day Federal Reserve meeting at 6:00 p.m. GMT. While the key interest rate is anticipated to remain at 5.50%, the rhetoric of the Chair of the Federal Reserve, Jerome Powell, during the press conference, which will start at 6:30 p.m. GMT, will be closely scrutinized.
Intraday technical picture:
Based on the 4H chart of the GBP/USD, the pair's consolidation below the 1.2500 level suggests potential movement toward support at 1.2430. However, technical benchmarks may undergo revisions following the dollar's response to the Fed's communication.
The USD/JPY pair experienced a decline at the onset of the week, yet by Wednesday, it rebounded and continued to strengthen.
Possible technical scenarios:
Examining the daily chart, we observe that the USD/JPY price has exceeded the 154.83 level and is nearing the resistance at 157.10. It is likely that the boundaries of this range will maintain relevance until the week's end.
Fundamental drivers of volatility:
At the beginning of the week, the yen surged against the dollar, triggered by USD/JPY surpassing 160 yen per dollar. Market speculation suggests possible currency intervention by Japanese authorities, although no official confirmation has been provided. However, by Wednesday, the Japanese currency relinquished its gains, underscoring its susceptibility to interventions, which is a restraining factor for USD/JPY against the backdrop of a strengthening US dollar.
In the meantime, the US currency is expected to react to the Federal Reserve's decision announcement at 6:00 p.m. GMT. While the key interest rate is anticipated to remain steady at 5.50%, market focus will primarily be on central bank governor Jerome Powell's remarks during the ensuing 6:30 p.m. GMT press conference.
Intraday technical picture:
As evidenced by the 4H chart of the USD/JPY pair, we should consider the boundaries of the range between 154.83 and 160.21 as broad price targets. The pair's trajectory may be influenced by the US dollar's response to the Fed's rhetoric today.
11