The EUR/USD pair slightly declined at the beginning of the week but still has the potential to strengthen amid the publication of inflation and unemployment data in the eurozone.
Possible technical scenarios:
The daily chart demonstrates that the EUR/USD pair managed to stay above the support of the range between 1.0777 and 1.0938 and has the potential to strengthen towards the resistance of this sideways range.
Fundamental drivers of volatility:
Inflation in the eurozone rose by 2.2% year-over-year, and the unemployment rate fell to 6.1%, supporting the euro. That being said, the impact of these indicators on ECB policy remains limited.
The key uncertainty factor for the pair remains the trade tariffs expected from the Trump administration. Potential tariffs on European cars could weaken the German economy and the entire EU, while the US also risks facing a recession. Goldman Sachs has raised the probability of an economic downturn in the US to 35%.
The market is focused on the upcoming PMI and JOLTS data along with US labor market reports, which may adjust expectations for the Fed's next steps. Tensions surrounding tariffs and their potential impact on the global economy continue to keep the EUR/USD pair in a zone of increased volatility.
Intraday technical picture:
As evidenced by the 4H chart of EUR/USD, we see consolidation above the support level of 1.0777, which provides grounds for recovery towards the resistance at 1.0938. However, reports from the US at the end of the week may result in a changed technical picture.
Sterling remains under pressure against the US dollar as investors assess the impact of potential US trade tariffs and the outlook for monetary policy.
Possible technical scenarios:
As we can see on the daily chart, GBP/USD has returned to the support level of 1.2862 and is holding above it. This leaves it with room to move towards the resistance at 1.3147. However, if the price falls below the horizontal level of 1.2862, a medium-term decline towards the 1.2550 level is possible.
Fundamental drivers of volatility:
Trade tariffs that the Trump administration may introduce remain the main risk for the UK economy. New tariffs are expected to hit key US partners, including the UK, which could lead to a slowdown in exports and a decline in business activity. The Office for Business Responsibility (OBR) forecasts a 1% decline in UK GDP if trade conditions worsen.
The Bank of England’s monetary policy also holds the central stage. Despite the risks of an economic slowdown, the regulator faces inflationary pressure caused by wage growth and consumer expectations. Under these circumstances, the Bank of England may maintain the current rate level to support price stability, limiting the potential for the pound to weaken.
Macroeconomic data and expectations for US Federal Reserve rates have an additional impact on GBP/USD. The dollar remains strong amid high interest rates and a stable labor market in the US. Investors are keeping a close eye on PMI indices, which will give an idea of the state of the economy and possible actions by regulators that determine the further dynamics of the currency pair.
Intraday technical picture:
Judging by the unfolding situation on the 4H chart of GBP/USD, the price continues to trade in a sideways range between 1.2862 and 1.3009. An exit from this range is possible if there’s a strong reaction of the dollar to US data.
USD/JPY remains close to 150.00 as investors assess the outlook for US and Japanese monetary policy amid possible new trade tariffs.
Possible technical scenarios:
Judging by the look of things on the daily chart, USD/JPY has returned to the support of the range between 148.63 and 151.96, where it still has some room to move towards its resistance. However, if 148.63 fails, the price may drop to 145.91.
Fundamental drivers of volatility:
The main factor putting pressure on the Japanese yen is the continuing policy of the Bank of Japan, which, despite rising inflation expectations, is in no hurry to implement an aggressive rate hike. Data from the Tankan survey showed a decline in business confidence in Japan, which increases uncertainty and forces the BoJ to act cautiously. On top of that, the positive mood in the stock markets reduces demand for safe assets, including JPY.
An additional driver for USD/JPY is the expected introduction of US trade tariffs. If the new tariffs affect Japanese companies, it could hurt Japan's economic growth and force the BoJ to maintain a soft policy. In the meantime, the US Federal Reserve faces pressure due to a possible economic slowdown, increasing the likelihood of cutting interest rates, which would weaken the dollar's position.
Investors are also focused on the upcoming US macroeconomic data, including labor market indicators and business activity indices. These reports will provide additional information about the state of the US economy and the potential actions of the Fed. If the data confirms an economic slowdown, the pressure on the dollar will intensify, which may shift the balance of power in the USD/JPY pair.
Intraday technical picture:
On the 4H chart of the pair, we see a sideways trend between 148.63 and 150.95. Locally, quotes could move from the middle of this range to either of its borders.
USD/CAD continues to hover near a two-week high as investors weigh the impact of US trade tariffs, oil price dynamics, and the outlook for the Fed's monetary policy.
Possible technical scenarios:
According to the daily chart of USD/CAD, the pair has retreated upwards from the support of the sideways range between 1.4271 and 1.4468 and retains a sufficient margin of movement towards its resistance.
Fundamental drivers of volatility:
One of the key factors affecting the USD/CAD rate remains the expectation of new trade tariffs from the US. A potential escalation of the trade conflict between the United States and Canada puts pressure on the Canadian dollar, increasing uncertainty ahead of Canada's snap elections. At the same time, the US dollar is supported by demand amid ongoing concerns about the global economy, although its growth is limited by expectations of a softer Fed policy.
Another major factor is the rise in oil prices, which supports the Canadian dollar. The recent surge in oil prices, driven by threats of supply disruptions due to geopolitical tensions in Russia and Iran, has created additional demand for CAD, restraining the growth of USD/CAD. If oil prices continue to rise, this could put pressure on the pair.
Investors are also waiting for crucial economic data from the US, including labor market statistics and the ISM business activity index. These releases could influence expectations regarding the Fed's future policy, which, in turn, will affect the dynamics of USD/CAD. Additionally, Donald Trump's statements on trade tariffs could be a key catalyst for the pair's movement in the near term.
Intraday technical picture:
As shown by the 4H chart of USD/CAD, we see that after a reversal upward from the 1.4271 level, the pair is on its way to the resistance of 1.4468. Locally, the price may move from the middle of this corridor to either of its boundaries.
Oil prices are rising amid threats of US sanctions against Russia and Iran, but pressure from a slowing global economy is restraining this growth.
Possible technical scenarios:
The price of Brent crude oil on the daily chart reached the resistance of the range between 72.05 and 75.17. From here, a downward correction and a rollback to the intermediate support of 73.28 are possible, or a breakout of the 75.17 level with growth to the next target of 77.03.
Fundamental drivers of volatility:
Oil prices rose slightly on Tuesday amid geopolitical tensions caused by US President Donald Trump's threats to impose secondary sanctions on Russian and Iranian oil.
Short-term growth is supported by the risks of a supply cut due to possible sanctions, but concerns about global demand and increased OPEC+ and US production are putting pressure on the market. Analysts expect that the slowdown in the Chinese and Indian economies, as well as trade barriers from the US, will hold back prices.
The eyes of the market participants on Tuesday are also on data regarding US oil reserves. A decrease of 2.1 million barrels is expected, which may affect the quotes.
ВIntraday technical picture:
As we can observe on the 4H chart of Brent, there is a consolidation below the level of 75.17 after a bullish flag was formed. Against this backdrop, further growth above the horizontal level of 75.17 to the target of 77.03 is likely.
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