The EUR/USD pair remains under pressure due to the strong US dollar, bolstered by geopolitical escalation, and the weakness of the euro.
Possible technical scenarios:
As we can observe on the daily chart, the EUR/USD pair was unable to overcome the dotted resistance level at 1.0614, which could push it back towards the support level of 1.0478. In the absence of significant fundamental catalysts for volatility, the pair may continue trading sideways between these levels.
Fundamental drivers of volatility:
The primary factors weighing on the euro include geopolitical tensions and the strengthening of the US dollar as a safe-haven asset. The escalation of the conflict between Russia and Ukraine, including Ukraine’s use of ATACMS missiles and the expansion of Russia's nuclear doctrine, has heightened market caution.
Additionally, the dollar benefits from expectations of tighter US monetary policy, driven by a potential acceleration in inflation. This stands in contrast to the eurozone, where economic growth is slowing despite high inflation, creating additional challenges for the European Central Bank (ECB). This week, markets will closely monitor ECB President Christine Lagarde’s speech at the Financial Stability Conference. Her comments could provide further insights into the ECB’s monetary policy stance and signal potential future movements in EUR/USD.
Intraday technical picture:
Judging by the unfolding situation on the 4H chart of EUR/USD, the formation of a double top (a bearish reversal pattern) following a local uptrend within the range between 1.0478 and 1.0614 strengthens the likelihood of the price moving back to the support level at 1.0478.
The GBP/USD pair has been cautiously recovering since the start of the week, but its growth remains constrained by both a strong dollar and a technical resistance level.
Possible technical scenarios:
According to the daily chart of GBP/USD, the price has rebounded upwards from the support level at 1.2608 and is now approaching the dotted resistance at 1.2723. If it fails to overcome this level, the pair may retreat back to the 1.2608 support.
Fundamental drivers of volatility:
The GBP/USD pair gained momentum following the release of October's UK consumer price index (CPI) data, which exceeded expectations. That being said, this growth is limited as the acceleration of inflation, particularly in the services sector, aligns with the Bank of England's forecasts. Despite current inflation trends, the Bank of England is unlikely to opt for a rate cut in December, with the likelihood of the next cut now shifted to February—a development already partially factored into market pricing. The pound could face additional downward pressure in the future due to a possible dovish shift in monetary policy.
Intraday technical picture:
Judging from the unfolding situation on the 4H chart of GBP/USD, the formation of a series of consistently higher lows suggests favorable conditions for continued price recovery. A breakout above the dotted resistance at 1.2723 and subsequent consolidation would pave the way for the pair to target the next level at 1.2792.
The USD/JPY pair continues to rise, surpassing the 155.00 mark, driven by a weakening yen and a strengthening dollar.
Possible technical scenarios:
On the daily chart of USD/JPY, the pair has once again climbed above the 154.83 level, paving the way for further growth toward the resistance at 157.10.
Fundamental drivers of volatility:
The USD/JPY pair is gaining strength amid rising US Treasury yields, reduced demand for safe-haven assets, and uncertainty surrounding the timing of the Bank of Japan’s rate hike. Additional pressure on the yen comes from improving global risk sentiment, although this could be disrupted by geopolitical tensions as well as moderate expectations regarding the potential easing of the Federal Reserve's monetary policy. The pair's movement will also depend on statements from FOMC members and Bank of Japan Governor Kazuo Ueda, who may provide clarity on future monetary policy. In the near term, USD/JPY retains its growth potential as long as the current macroeconomic conditions remain unchanged.
Intraday technical picture:
An uptrend is evident on the 4H chart of USD/JPY. Following a rebound upward from its support level, the pair retains the technical potential to strengthen toward 157.10, where the channel resistance line lies.
The USD/CAD pair declined as the Canadian dollar strengthened following the release of Canadian inflation data for October, which exceeded expectations.
Possible technical scenarios:
On the daily chart of USD/CAD, the pair has retreated downward from the resistance level at 1.4116 since the start of the week and subsequently broke out the 1.3977 level. Consolidation below this horizontal level would enable the pair to continue its decline toward the 1.3842 level.
Fundamental drivers of volatility:
The rise in the annual consumer price index to 2.0% provided significant support to the Canadian dollar and reduced the likelihood of the Bank of Canada implementing a sharp rate cut in December. The probability of a 50 basis point rate cut dropped from 37% to 26%, bolstering the currency. However, geopolitical tensions between Russia and Ukraine are limiting the pair’s decline by supporting the US dollar. In the near term, the pair’s dynamics may be influenced by upcoming Canadian macroeconomic data, particularly the retail sales report scheduled for Friday, and potential increased demand for safe-haven assets due to geopolitical developments.
Intraday technical picture:
On the 4H USD/CAD chart, it remains uncertain whether the resistance level at 1.3977 will hold. From the current technical setup, further decline appears possible. However, if the breakout above this level proves false and the price consolidates above the 1.3977 horizontal level, a recovery toward the resistance at 1.4116 could occur.
Oil prices are rebounding at the start of the week, following an upward move from the support level of a sideways trading range.
Possible technical scenarios:
On the daily chart, Brent prices have moved upward from the 70.85 level, leaving room for further growth toward the levels of 75.18 and 76.01 marked with a dotted line.
Fundamental drivers of volatility:
Oil prices are showing a cautious recovery on Wednesday, trading near yesterday’s highs. On one side, the escalation of the Russia-Ukraine conflict is fueling fears of supply disruptions, which is providing support to prices. On the other side, a significant increase in US crude oil inventories by 4.75 million barrels last week—exceeding analysts' expectations—is exerting downward pressure on the market. Additionally, a rise in oil imports by China, signaling recovering demand from the world’s largest crude oil consumer, is giving prices an extra boost. Official data from the Energy Information Administration (EIA) on US reserves, due on Wednesday, may further influence price dynamics.
Intraday technical picture:
The 4H chart of Brent shows that the prices are currently pausing below the local dotted resistance level at 73.63. A breakout and consolidation above this level would pave the way for growth toward 75.18. Alternatively, a return to the support level at 70.85 remains possible.
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