This week, the decline of the EUR/USD pair found support at December's lows, potentially influenced by technical factors that contributed to the US dollar's retreat following last week's gains.
Possible technical scenarios:
The breakout of support at 1.0749 on the daily chart proved to be a false breakout. The EUR/USD rates have gone above this level and currently hover within the vicinity of the nearest resistance at 1.0801. Should this resistance be surpassed, the subsequent target for upward movement stands at 1.0888.
Fundamental drivers of volatility:
The previous week witnessed shifts in Fed rhetoric and a robust US labor market report, which tempered investor expectations for imminent and swift monetary easing in the current year.
According to data from CME Group's FedWatch Tool, the probability of a rate cut in March now stands at 21.5%, a significant deviation from the initial 68.1% recorded at the beginning of the year.
If positive economic indicators persist in the United States, particularly regarding inflation later this month, the possibility of an earlier rate cut may arise, potentially leading to further depreciation of the dollar. In the meantime, this week, the US currency could be sensitive to statements from Fed officials, shedding light on future rate plans.
Intraday technical picture:
As we can see on the 4H chart of EUR/USD, there is a downward trend, from which the pair has failed to exit in a downward direction. As the price rebounds toward its resistance level, there is potential for it to surpass the 1.0801 mark and ascend toward the 1.0830 area.
The GBP/USD pair rebounded from this week's losses and retraced to Friday's lows as the US dollar retreated from its recent highs.
Potential technical scenarios:
As evidenced by the daily chart of the GBP/USD pair, it's evident that the price is attempting to stabilize above the 1.2608 level. Should this consolidation prove successful, further upward movement could be anticipated within the broad range between 1.2608 and 1.2792.
Fundamental drivers of volatility:
This week's news landscape appears relatively scarce, with no significant macroeconomic indicators scheduled from either the United States or the United Kingdom. Meanwhile, the market players will closely monitor statements from central bankers, expected to shed light on future interest rate policies.
The focus is currently on the Federal Reserve, given the Bank of England's reluctance to implement rate cuts. Expectations surrounding the Fed's monetary stance primarily revolve around the timing of potential monetary easing measures.
Data from CME Group's FedWatch Tool currently indicates a 21.5% probability of a rate cut in March, markedly lower than the initial 68.1% recorded at the beginning of the year. Key expectations have shifted towards May.
Intraday technical picture:
Judging by the unfolding situation on the 4H chart, the consolidation of the GBP/USD above the 1.2608 level suggests a path towards the immediate target of 1.2656. Should the current momentum persist, the strength of the 1.2656 level may be put to the test, with potential consolidation above it.
The AUD/USD pair recouped losses faced earlier this week by Wednesday, benefiting from a decline in the US dollar, which managed to reverse Monday's losses within two days.
Possible technical scenarios:
According to the daily chart, the AUD/USD pair reached resistance at 0.6541 marked with dotted lines. From this point, a potential reversal downwards toward the level of 0.6458 or an attempt to break out the 0.6541 level is possible. In the latter case, consolidation above 0.6541 could pave the way for further advancement towards the subsequent dotted resistance at 0.6619.
Fundamental drivers of volatility:
This week, the Reserve Bank of Australia maintained its key interest rate unchanged but hinted at the possibility of future rate hikes if deemed necessary, which provided marginal support to the Australian dollar.
However, the pair's dynamics are currently affected by the US dollar's movements and shifts in market risk sentiment. The performance of the American currency is swayed by evolving expectations regarding the timing of the first Federal Reserve rate cut.
As per CME Group's FedWatch Tool, the probability of a rate cut in March stands at 21.5%, notably lower than the 68.1% probability recorded earlier this year.
Intraday technical picture:
On the 4H chart of the AUD/USD pair, we can observe a reversal from the dotted resistance at 0.6541, setting the stage for a potential local retracement towards 0.6498, with the possibility of its testing.
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