The EUR/USD pair maintains its upward momentum, having updated its two-month highs amid the weakness of the American currency.
Possible technical scenarios:
As we can see on the daily chart of EUR/USD, the pair is testing the upper boundary of the 1.1494-1.1788 range. If consolidation above 1.1788 is successful, the next target for growth will be the horizontal at 1.1898.
Fundamental drivers of volatility:
This week, the Fed meeting is the key event for the dollar in the pair. The market expects a resumption of the monetary policy easing cycle. Expectations of rate cuts have already pressured US government bond yields and pushed the dollar index to eight-week lows. An additional factor will be the US retail sales data for August, forecasted to slow to 0.3% from 0.5%, which could further weaken the American currency.
The euro, in turn, is supported by expectations of industrial production recovery and moderately optimistic statements from ECB officials. Despite France’s downgrade by Fitch, the market is focusing on eurozone economic stability and signals that current rates align with inflation targets. Local risks are largely ignored, and traders continue to increase long positions in the euro.
That being said, weak economic sentiment in Germany may limit further growth. The ZEW index for September indicates deterioration in expectations, highlighting risks of a regional economic slowdown.
Intraday technical picture:
Judging by the look of things on the 4H chart, EUR/USD is attempting to consolidate above 1.1788. A successful hold above this level would open the way for quotes to rise to 1.1898.
The pound sterling strengthened against the dollar, reaching two-month highs near 1.3640. The GBP/USD pair is supported both by the stability of the UK economy and the declining appeal of the US dollar.
Possible technical scenarios:
On the daily chart of GBP/USD, the pair is testing the resistance of the 1.3380-1.3630 range. A breakout above this level would open the path to the next target at 1.3752.
Fundamental drivers of volatility:
The pound gained support following the release of UK labor market data. The unemployment rate, according to the ILO methodology, remained at 4.7%, in line with expectations, while employment growth reached 232,000, close to the forecast. Average wages excluding bonuses slowed to 4.8% from 5%, while including bonuses, they accelerated to 4.7%, signaling a resilient labor market and supporting expectations that the Bank of England can maintain rates at the current level.
This week, market focus is on UK inflation data and the upcoming Bank of England meeting. The consumer price index is forecast to rise to 3.9% YoY from 3.8% previously. Confirmation of higher inflation would strengthen the case for keeping the rate at 4%, further supporting the pound.
The US dollar remains under pressure due to expectations of Fed policy easing. The market is largely pricing in a 0.25% rate cut on Wednesday, with some investors considering a 0.50% cut. Ahead of the Fed meeting and the release of August retail sales—forecasted to be weaker than the previous month—the dollar index fell to seven-week lows.
Intraday technical picture:
According to the 4H chart, it is unclear whether the price will consolidate above 1.3630. The reaction of the pair to the Fed and Bank of England meetings will likely determine its position relative to this level.
The USD/JPY pair remains under pressure amid the divergence between Fed and Bank of Japan policies. Investors are pricing in a quick rate cut in the US and possible tightening in Japan, which is supporting demand for the yen.
Possible technical scenarios:
Given the unfolding scenario on the daily chart, USD/JPY continues trading within the 145.91-148.63 range, approaching support. Upon reaching it, an upward reversal is possible, though if the fundamental balance doesn’t change, sideways movement in this corridor may continue.
Fundamental drivers of volatility:
The Japanese yen strengthened to weekly highs amid dollar weakness and expectations that the Bank of Japan will continue normalizing policy. The market is pricing in a rate hike this year and nearly two hikes by next July, supporting the yen. Meanwhile, the Fed is preparing to resume rate cuts, increasing the divergence between the two central banks and pressuring USD/JPY.
Political uncertainty in Japan following PM Shigeru Ishiba’s resignation and Shinjiro Koizumi’s readiness to run for LDP leadership may make the Bank of Japan act cautiously. Positive global market sentiment and high risk appetite also limit yen demand, as investors are less drawn to traditional safe havens.
The US dollar faces pressure from expectations of more accommodative Fed policy. The dollar index fell to its lowest since late July amid forecasts of three rate cuts this year and signs of a slowing US labor market. Key catalysts for USD/JPY will be the Fed’s Wednesday decision and the Bank of Japan meeting on Friday, which will define the pair’s balance of power.
Intraday technical picture:
The 4H chart shows that the USD/JPY still has room to move toward support at 145.91. If this level — or previous lows — is reached, the price may reverse upward.
The USD/CAD pair is trading cautiously ahead of a busy midweek, with the Fed and the Bank of Canada meetings coming up. The outcomes of these meetings will shape the short-term direction for both the US dollar and the Canadian currency.
Possible technical scenarios:
On the daily chart, USD/CAD continues trading in the 1.3744-1.3861 channel, approaching support. If the 1.3744 level is broken out, the decline could extend to 1.3503 in the medium term.
Fundamental drivers of volatility:
The Canadian dollar is consolidating against the US dollar amid expectations of two key events this week: the Fed and Bank of Canada meetings, both on Wednesday. The market is largely pricing in a 0.25% Fed rate cut, with some investors allowing for a more aggressive 0.50% move, which limits the dollar’s upside.
In Canada, the focus is on the August inflation data. Annual CPI is expected to rise above the 2% target (after July’s 1.7%), while core inflation remains near 3%. This could make the Bank of Canada adopt a cautious stance, signaling readiness to pause easing if price pressures persist, even if a 0.25% rate cut is projected.
Thus, the Fed’s decision may weigh on the dollar, while the Bank of Canada’s stance will influence the Canadian dollar’s stability. If the Fed eases and the BoC shows restraint, CAD could strengthen against USD in the coming days.
Intraday technical picture:
As evidenced by the 4H chart, USD/CAD has limited room to decline within the range between 1.3744 and 1.3861. After this, the price may either reverse upward or test 1.3744 for support.
Oil prices are holding steady, with the market balancing between geopolitical risks and expectations of a shift in US monetary policy.
Possible technical scenarios:
On the daily chart, Brent is attempting to consolidate above 66.51. If successful, the next target could be 70.62. Alternatively, a pullback to the 65.02 support level is possible.
Fundamental drivers of volatility:
Oil remains near previous session levels as the market weighs supply risks from Russia against expectations of a Fed rate cut. Ukrainian drone strikes on Russian refineries have temporarily removed about 300 thousand barrels per day of capacity, limiting Moscow’s export potential and potentially tightening global supply. At the same time, Asian buyers — mainly China and India — continue importing Russian oil actively, which moderates the supply impact.
Demand is also supported by expectations of softer US monetary policy: lower Fed rates could stimulate economic activity and boost consumption. However, analysts remain cautious due to risks of a US economic slowdown, which tempers optimism about oil demand.
US oil inventory dynamics will also influence prices. Preliminary estimates suggest inventories fell by 6.4 million barrels last week, reversing the previous week’s growth. If confirmed, this could provide additional support for oil prices in the coming days.
Intraday technical picture:
As we see on the 4H chart, Brent is currently facing local resistance at 67.48 marked with dotted lines. A successful breakout above 66.51 would open the path to a decline toward 65.02.
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