Amid a spike in the U.S. currency, the EUR/USD pair dropped in the middle of the week. During congressional hearings on Tuesday and Wednesday, Fed Chairman Jerome Powell mentioned that a longer interest rate hike might be needed because of the high inflation. The hawkish rhetoric encouraged target expectations for the maximum level of interest rates in the United States, which, in turn, supported the dollar.
Possible technical scenarios:
On the daily chart, the EUR/USD decline was halted by support at 1.0535 at its February lows. At the time of writing, the price pulled back upwards, creating technical prerequisites for the pair to move up to 1.0691 marked with the upper green dotted lines.
A breakout of support at 1.0535 followed by a weakening towards 1.0492 may turn out to be an alternative scenario.
Fundamental drivers of volatility:
The macroeconomic figures listed below may serve as volatility catalysts for the European single currency in the pair until the end of the week.
The German inflation stats for the month of February will be released at 7:00 am GMT on Friday. The Consumer Price Index YoY is projected at 8.7%, and at 0.8% MoM.
The president of the European Central Bank Christine Lagarde is expected to speak on Friday at 3:00 pm GMT.
Meanwhile, the U.S. dollar may be sensitive to the February U.S. employment stats to be released at 1:30 pm GMT. The Nonfarm Payrolls are projected at 205 thousand compared to 517 thousand previously. At the same time, the unemployment rate is expected to remain at 3.4%.
Intraday technical picture:
On EUR/USD pair’s 4H chart, we can see that the pair has a movement range to the local resistance at 1.0592 following a reversal upwards from 1.0535. Consolidation above it will give quotes a chance to continue to increase towards the target at 1.0691, an upper level marked with green dotted lines.
The GBP/USD pair demonstrated a decline on Tuesday amid the hawkish rhetoric of the Fed Chairman due to the growth of the U.S. dollar. Friday's employment report may also affect the dynamics of the pair or aggravate the drop.
Possible technical scenarios:
GBP/USD quotes dropped below 1.1934, yet failed to consolidate below the January lows. From a technical perspective and given the anticipation of Friday's news, the price may travel to any boundary of the 1.1744 - 1.1934 range.
Fundamental drivers of volatility:
The dynamics of the pound sterling may be affected by the UK GDP data on Friday at 7:00 am GMT if the final figures turn out to be higher or lower than expected. GDP MoM in January is expected to be at 0.1% against -0.5% in the previous period. Based on the forecast, the GDP 3M/3M for the month of January may demonstrate a contraction of 0.1% compared to a 0.3% decline previously.
The U.S. dollar’s volatility may intensify in response to the labor market stats released at 1:30 pm GMT on Friday. The Nonfarm Payrolls for the month of February are projected at 205 thousand against 517 thousand in the previous period. Aside from that, the unemployment rate is expected to remain at 3.4%, which is the same as in January.
Intraday technical picture:
On the 4H chart, the GBP/USD pair has some room to move toward the 1.1934 resistance. Once it is reached, both a reversal and a pullback to the decline in the 1.1744 - 1.1934 sideways range are likely, along with a level breakout and a consolidation above. In the second instance, the March 7 highs will be the next growth target.
Against the backdrop of an increase in the U.S. dollar, the USD/JPY pair has grown this week. During Fed Chairman Jerome Powell’s testimony before Congress, his hawkish rhetoric served as the catalyst for the strengthening of the U.S. currency.
Possible technical scenarios:
On the daily chart, USD/JPY hit the upper boundary of the 133.59 - 137.89 wide range. From there, it pulled back and retreated downward on Thursday. From a technical perspective, the price has enough potential to fall within this corridor in the medium term. That being said, this scenario is likely to be adjusted by a surge in the U.S. dollar’s volatility in response to American labor market figures released on Friday.
Fundamental drivers of volatility:
The dynamics of the USD/JPY pair will remain sensitive to the U.S. currency’s volatility until the end of the week. Traditionally, the behavior of the U.S. dollar may be affected by the U.S. labor market report to be released at 1:30 pm GMT.
The number of people employed in the non-agricultural sector (Nonfarm Payrolls) is expected to be 205 thousand against 517 thousand in the previous period. Meanwhile, the unemployment rate is projected at 3.4%.
Intraday technical picture:
On the 4H chart of the USD/JPY pair, we can see a local uptrend within a wide range of 133.59 - 137.89. A reversal from its support upwards is likely to bring the pair back to the resistance at 137.89 and put this boundary’s strength to the test.
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