The appreciation of the US dollar and the ECB's subdued stance this week recalibrated market anticipations concerning the beginning of rate reductions, consequently exerting downward pressure on the pair.
Possible technical scenarios:
Examining the daily chart of EUR/USD, it's evident that the pair has reached a support level at 1.0672. From this juncture, there are two likely outcomes: either a rebound towards the 1.0723 level marked by a dotted line or a further descent towards the subsequent target below 1.0615.
Fundamental drivers of volatility:
The euro depreciated over 1% this week following the ECB's decision on Thursday to maintain interest rates at a historical peak, albeit signaling the potential commencement of rate cuts as early as June.
Following a robust US inflation report, which tempered expectations regarding the Federal Reserve's timeline for monetary policy easing, the dollar strengthened, adding strain to the pair. Currently, the ECB's projected rate cut in June is anticipated to precede the Fed's, with the latter now expected to initiate rate cuts no earlier than September.
Futures markets currently indicate an approximate 40 basis point reduction in Fed easing policy for this year, down from roughly 60 basis points at the outset of the week.
Intraday technical picture:
Judging by the unfolding situation on the 4H chart of the EUR/USD pair, it's apparent that the pair has encountered support at 1.0672, although it remains uncertain whether this level will hold or impede further price decline. We need to wait for the price's stabilization around this boundary.
The GBP/USD pair faced downward pressure this week due to the strengthening US dollar, buoyed by an unexpectedly robust inflation report.
Potential technical scenarios:
Reviewing the daily chart of GBP/USD, the pair has reached a support level at 1.2500, which could either act as a barrier to further decline or be broken out. In the former scenario, a potential recovery towards resistance at 1.2608 may occur, while if the 1.2500 level fails to hold, the next downside target would be the horizontal support at 1.2430.
Fundamental drivers of volatility:
The UK's GDP data released on Friday indicated progress towards exiting a mild recession, with consecutive months of output growth. February saw a 0.1% month-over-month expansion, with January's figures revised upward from 0.2% to 0.3% growth.
That being said, the pound remains under pressure from the resilient US dollar, bolstered by this week's unexpectedly strong inflation report, which further delayed expectations for a Federal Reserve rate cut.
Intraday technical picture:
As evidenced by the 4H chart of the GBP/USD pair, the price is cautiously retracing upward from the 1.2500 support level, although the strength of this movement remains uncertain. Over the coming days, the pair is likely to establish its stance around this horizontal line.
The USD/JPY pair went down under the influence of a notably strengthened dollar, while Japanese authorities, despite intervention warnings, displayed no urgency in bolstering their currency.
Possible technical scenarios:
According to the daily chart of the USD/JPY pair, the price is currently testing resistance at 153.09. From this juncture, two outcomes are likely: either a retreat to the 152 yen per dollar area or a continuation of the upward trajectory towards the target of 154.83.
Fundamental drivers of volatility:
The yen witnessed a sharp decline this week, ultimately plunging to a 34-year low on Friday as the US dollar surged. Robust US inflation data underscored enduring price strength, dampening prospects of a Federal Reserve interest rate cut this year.
Despite the drop to 153 yen per dollar, Japan refrained from foreign exchange intervention, though this option remains viable, given the numerous intervention warnings issued by authorities.
Intraday technical picture:
According to the 4H chart of the USD/JPY pair, as the price hovers around the 153.09 level, a bullish flag pattern emerges. Technically, this suggests upward potential momentum toward the 153.09 level. That being said, intervention by Tokyo in the market could prompt a price downturn.
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