The EUR/USD pair is facing downward pressure this week due to the strengthening dollar, although this dynamic may shift by the week's end due to technical factors.
Possible technical scenarios:
The EUR/USD pair retraced from its recent highs between 1.0888 and 1.1001. If its current support holds, there's a likelihood of a reversal upwards and subsequent sideways movement. If there is a breakout and the pair consolidates below 1.0888, it could pave the way for a further decline towards the next target at 1.0801.
Fundamental drivers of volatility:
The US dollar has gained ground this week, particularly following unexpectedly robust inflation data released on Tuesday, which tempered expectations of a Federal Reserve interest rate cut at its June meeting.
The consumer price index rose by 3.2% annually, slightly exceeding expectations of a 3.1% increase. That being said, the likelihood of a rate cut in June, according to CME Group's FedWatch Tool, has decreased slightly to around 67%, down from 71% the previous week.
Attention is now focused on US retail sales, a key measure of consumer spending that has remained relatively steady, as well as producer prices (PPI) scheduled for release on Thursday at 12:30 p.m. GMT.
Projections indicate an anticipated increase in retail sales of 0.8%, rebounding from a previous decline of 0.8%. Core PPI for February is forecasted to rise by 0.2% month-over-month, compared to a previous increase of 0.5%. Overall, the PPI is expected to remain unchanged at 0.3%.
Intraday technical picture:
Judging by the look of the unfolding situation on the 4H chart, there's a series of successively lower highs and lower lows within the range between 1.0888 and 1.1001, with room for movement towards support. The direction of the pair hinges on how it reacts around the horizontal level at 1.0888.
The GBP/USD pair continues to face downward pressure for the third consecutive trading session, driven by the strengthening US currency and diminishing prospects of monetary policy easing by the Fed in June.
Potential technical scenarios:
As we can see on the daily chart of GBP/USD, the pair has dipped below the key level of 1.2792. Should this horizontal level act as resistance, the price will likely persist in its decline toward the support at 1.2656.
Fundamental drivers of volatility:
The pound experienced a decline on Tuesday following data indicating a slight slowdown in regular wage growth in the UK, which exceeded expectations. That being said, the overall economic improvement is sufficient to reassure investors regarding the likelihood of the Bank of England maintaining interest rates at a higher level.
Despite this, sterling bulls argue that the robust labor market and ongoing economic recovery counteract negative sentiment.
Market sentiment anticipates the Bank of England holding rates steady at 5.25% until August, while the ECB and Fed are more inclined towards a rate cut in June.
Upcoming data releases on Thursday at 12:30 p.m. GMT, concerning US retail sales and Producer Price Index (PPI), may influence the dollar's dynamics within the pair. This week, the US currency gained support from an inflation report that surpassed expectations. Projections indicate an anticipated increase in US retail sales by 0.8%, following a previous decline of 0.8%. Core PPI for February is forecasted to rise by 0.2% monthly, down from the previous 0.5%, while overall PPI is expected to remain unchanged at 0.3%.
Intraday technical picture:
Based on the 4H chart, the GBP/USD pair is seen retracting from resistance at 1.2792. A consolidation below the marked level of 1.2761 is likely to pave the way for further downward movement towards the level at 1.2656.
The USD/JPY pair is staging a recovery this week, propelled by the strengthening of the American currency.
Possible technical scenarios:
As evidenced by the daily chart, the USD/JPY pair has found support around 146.37 and is currently within proximity of the nearest resistance at 148.80. If this resistance level is broken out from below and the price consolidates above it, the next target for upward movement would be 150.17.
Fundamental drivers of volatility:
The Japanese yen experienced a decline this week, as market sentiment remains skeptical regarding the likelihood of an early tightening of the Bank of Japan's monetary policy.
In the meantime, the US dollar received a boost from a higher-than-anticipated increase in inflation, prompting a reassessment of expectations for a rate cut by the Federal Reserve.
Data from CME Group's FedWatch Tool indicates a slight decrease in market expectations for the initiation of rate cuts at the Fed's June meeting, down to approximately 67% from 71% the previous week.
Attention is now directed towards US retail sales and Producer Price Index (PPI), scheduled for release on Thursday at 12:30 p.m. GMT. Projections suggest an anticipated increase in retail sales of 0.8%, following a previous decline of 0.8%.
Core PPI for February is forecasted to rise by 0.2% monthly, compared to the previous increase of 0.5%, while overall PPI is expected to remain unchanged at 0.3%.
Intraday technical picture:
As shown on the 4H chart of the USD/JPY pair, a pattern of successively higher lows creates technical prerequisites for upward movement within the range between 146.37 and 148.80.
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