This week, the forex market is experiencing a phase of consolidation, characterized by a calm response to macroeconomic factors, resulting in subdued dynamics.
Possible technical scenarios:
As we can see on the daily chart, the EUR/USD pair initially saw an uptick at the beginning of the week, but its recovery was stopped by resistance at 1.0592. If it fails to overcome it, there's potential for a retreat to Friday's lows. Should these lows be updated, the pair may continue its downward trajectory toward the support at 1.0448.
On the flip side, an alternate scenario involves consolidation above 1.0592. If this consolidation leads to an update of last week's highs, it may pave the way for the pair to reach the resistance at 1.0707 marked with dotted lines.
Fundamental drivers of volatility:
This week, the currency pair exhibited a cautious response to both the reports on US Retail Sales and Euro Area Inflation.
Market players are anticipating a crucial speech by Fed Chair Jerome Powell on Thursday at 4:00 p.m. GMT, eagerly seeking insights into the central bank's plans regarding potential rate hikes before the year's end. His rhetoric may have a significant impact on the dollar's volatility in the pair.
Aside from that, Thursday at 12:30 p.m. GMT is a key moment to keep an eye on the weekly data concerning initial jobless claims in the United States, which are expected to reach 213 thousand claims, up from the previous 209 thousand.
Concurrently, the release of the Philadelphia Fed Manufacturing Activity Index, projected at -6.8 for October compared to the previous -13.5, is another event worth monitoring closely.
Intraday technical picture:
As evidenced by the 4H chart of the EUR/USD pair, we observe the second price rebound from the 1.0592 resistance level, indicating a potential path for the pair to retreat toward the week's lows in the middle of the sideways range between 1.0448 and 1.0592.
The GBP/USD pair has been trading in an increasingly narrowing range of price fluctuations this week, displaying a limited reaction to macroeconomic developments in both countries.
Possible technical scenarios:
As evidenced by the daily timeframe, we observe the GBP/USD pair trading between the highs and lows of the Friday trading session. It is consolidating around the mid-point of the upward trend, just above the support at 1.2146. In the event that this support is broken out, there is still potential for the quotes to descend to 1.1934 within the context of the prevailing trend. During this consolidation phase, the price may approach the resistance of the downtrend and subsequently retreat from it.
An alternate scenario could involve a rebound toward the horizontal resistance at 1.2323.
Fundamental drivers of volatility:
While the British pound demonstrated a subdued response to the labor market and inflation reports in the United Kingdom during the first half of the week, we shouldn't dismiss the potential impact on volatility stemming from the release of UK Retail Sales Data for September, scheduled for Friday at 7:00 a.m. BST. Projections indicate that the Core Retail Sales Index may reflect a 0.4% decline, following a prior increase month-over-month of 0.6%, and a 0.0% contraction year-over-year, down from a 1.4% decline in the preceding period.
In addition, the US dollar within the pair may respond to the speeches of Fed Chair Jerome Powell on Thursday at 4:00 p.m. GMT as the week draws to a close. During his address, market players will be seeking more clarity regarding the Federal Reserve's intentions concerning potential interest rate hikes by the year's end.
Intraday technical picture:
Judging by the unfolding situation on the 4H chart of the GBP/USD pair, the price is consolidating above the support at 1.2146. An exit from the narrow sideways range may occur, potentially propelled by a robust fundamental catalyst. This catalyst might emerge from factors like fresh geopolitical developments or the rhetoric of Fed Chair Jerome Powell.
The AUD/USD pair is showing a cautious recovery this week, coinciding with a dip in the US dollar's value within a tight trading range. It's important to note that this recovery aligns with the broader uptrend.
Possible technical scenarios:
Upon closer examination of the pair’s daily chart, it becomes apparent that should the interim resistance level at 0.6364 marked with dotted lines fail to stop the price's progress, the ongoing recovery might extend to the upper boundary of the descending range around 0.6450. At this juncture, the lower boundary of the trading range may be regarded as the October lows.
Fundamental drivers of volatility:
The minutes from the recent RBA meeting indicate that the central bank is keeping the door open to the possibility of increasing interest rates further as a measure to curb inflationary pressures. While this provided some localized support to the Australian dollar, the market player’s primary focus remains on the Federal Reserve and the trajectory of the US dollar.
Investors are eagerly anticipating a speech by Jerome Powell, the US Federal Reserve Chair, scheduled for Thursday at 4:00 p.m. GMT. They are hoping that it will shed more light on the central bank's intentions concerning a potential interest rate hike before the year's end. This may, in turn, have an impact on the volatility of the US dollar in this currency pair.
Intraday technical picture:
As shown on the 4H chart of the AUD/USD pair, it remains uncertain whether the recent breakout of the nearby resistance at 0.6364 marked with dotted lines was true or false. If the price consolidates above this level, it will pave the way for an advance toward the slopping resistance. On the other hand, a return to the October lows is another possible scenario.
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