The EUR/USD pair fell on Wednesday due to the strengthening of the US dollar. This week's data from the US will determine volatility and price direction.
Possible technical scenarios:
The EUR/USD pair hit the resistance level of 1.0888 this week and has since retreated. From its current level, the price has room to move down to the support level of 1.0801.
Fundamental drivers of volatility:
The dollar, which remains the primary driver of EUR/USD volatility this week, strengthened by Wednesday, recovering from Monday's losses. This was bolstered by rising expectations that the Federal Reserve will not cut rates until the end of the year.
The dollar also gained due to higher Treasury yields following an unsuccessful auction of two-year and five-year securities, raising concerns about demand for US government debt.
Aside from that, investors were surprised by a sharp increase in the US consumer confidence index for May, which economists had predicted would decline for the fourth consecutive month, especially after weak results from a similar University of Michigan survey on Friday.
This has led to speculation about the economy's strength and significant inflation pressures, complicating the Fed's policy forecasts. According to CME Group's FedWatch Tool, traders now estimate a 44% chance of at least a quarter-point interest rate cut by September, following the latest data.
Intraday technical picture:
As evidenced by the 4H chart of the EUR/USD pair, the price is testing the local support at 1.0843, marked with a dotted line. A breakout and consolidation below this level will pave the way for the price to reach the next target of 1.0801.
The GBP/USD pair's growth this week was interrupted by the strengthening of the US dollar. With no planned volatility catalysts from the UK, the US dollar will be decisive for the pair's dynamics this week.
Potential technical scenarios:
As we can see on the daily chart, the GBPUSD pair turned down from the resistance range between 1.2656 and 1.2792. The targets for reduction are the support levels of 1.2708 and 1.2656.
Fundamental drivers of volatility:
The strengthening of the US dollar, driven by rising US government bond yields and reduced expectations for easing the Fed's monetary policy, is putting pressure on the GBP/USD pair.
With no significant macroeconomic statistics expected from the UK this week, the dynamics of the US dollar will be the key factor for the pair.
Key US reports will be released on Thursday and Friday, with market participants focusing on GDP data and personal consumption expenditure statistics, an important inflation indicator that could clarify the prospects for a Fed rate cut.
Intraday technical analysis:
Judging by the unfolding situation on the 4H chart, the GBP/USD pair retreated from the resistance of the ascending channel, creating technical conditions for a decline to the levels of 1.2708 and 1.2656 from the current horizontal resistance of 1.2792.
The growth of the USD/JPY pair, driven by the significant interest rate difference between the Federal Reserve and the Bank of Japan, has stalled but could resume at any time, as the pair has room to reach April's highs.
Possible technical scenarios:
The daily chart demonstrates that the USD/JPY price is putting the resistance of the sideways range between 154.83 and 157.10 to the test. If the price exits upwards and consolidates above 157.10, it could rise to the psychological level of 160 yen per dollar. Alternatively, a pullback to the support level at 154.83 is possible.
Fundamental drivers of volatility:
The USD/JPY pair is consolidating in a narrow range this week, balancing between the pressure from a rising US dollar and concerns about potential intervention from Japanese authorities.
Ultra-low rates from the Bank of Japan, combined with high rates from the Federal Reserve, make the Japanese yen attractive for carry trade strategies, leading to its decline.
Intraday technical picture:
On the four-hour chart, the USD/JPY pair continues to grow smoothly after exiting upward from a symmetrical triangle. This pattern suggests potential growth above the resistance level of 157.10, targeting 160 yen per dollar.
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