The US dollar experienced a decline on Tuesday in anticipation of the US inflation report, leading to a recovery in the EUR/USD pair.
Possible technical scenarios:
As evidenced by the daily chart, the EUR/USD pair found support at the local level of 1.0722, marked with dotted lines, and subsequently rebounded to the resistance at 1.0808. If 1.0808 is successfully overcome, there is a possibility that the price may continue its upward movement toward the target of 1.0958.
Fundamental drivers of volatility:
This week, the primary catalysts affecting volatility for the pair will be the meetings of the Fed and ECB, along with inflation and retail sales reports in the United States. Market players will form expectations based on central banks' rhetoric and incoming statistics regarding the potential end of rate hike cycles in the euro area and the United States, as well as the timing of potential rate cuts.
The US inflation report is scheduled for release on Tuesday at 1:30 p.m. (GMT). Projections suggest the core CPI to remain at 4.0% year-over-year, with a month-over-month increase from 0.2% to 0.3%. The month-to-month CPI is anticipated to be 0.0%, with a year-over-year decrease from 3.2% to 3.1%.
On Wednesday at 6:00 p.m. (GMT), the decision on the interest rate of the US Federal Reserve will be announced, expected to remain unchanged at 5.50%.
At 7:00 p.m. (GMT), economic forecasts and FOMC statements will be published, followed by the FOMC press conference at 7:30 p.m. (GMT).
On Thursday at 1:30 p.m. (GMT), the US dollar may react to the report on retail sales, with an anticipated decrease of 0.1% in volume for November, mirroring the previous period.
Results of the ECB meeting will be disclosed on Thursday at 1:15 p.m. (GMT), with the rate expected to remain at 4.50%. The significance lies in the rhetoric and tone of statements. At 1:45 p.m. (GMT), a press conference by the ECB will take place, followed by a speech from President of the European Central Bank Christine Lagarde at 3:15 p.m. (GMT).
Intraday technical picture:
As we can see on the 4H chart of the EUR/USD pair, the level of 1.0808 has been reached. The subsequent movement could involve either a reversal downward with a return to support at 1.0722 or an attempt to break it out and consolidate higher. The realization of these scenarios will hinge on the US dollar's reaction to today's macroeconomic statistics.
The UK labor market data triggered a modest local decline in the GBP/USD pair. That being said, as investor focus shifted to anticipated data from the US, a decline in the dollar let the pair make a slight recovery.
Possible technical scenarios:
Over the course of this week, a two-day recovery propelled the GBP/USD pair back to the resistance at 1.2601. If the price retraces from this level, the immediate downside target will be Friday's lows. A sustained price consolidation above 1.2601 would pave the way for continued upward movement towards the highs of December 4 (1.2723).
Fundamental drivers of volatility:
The pivotal event for the pound this week revolves around the Bank of England meeting. An announcement is expected on Thursday at noon (GMT), confirming that the main interest rate will be maintained at 5.25%.
In the meantime, the dollar is poised for a week marked by significant events. On Tuesday at 1:30 p.m. (GMT), the release of the US inflation report is anticipated. Projections suggest the core CPI will persist at 4.0% year-over-year, with a month-over-month increase from 0.2% to 0.3%. The month-on-month CPI is forecast to be 0.0%, with the annual rate dropping from 3.2% to 3.1%.
Wednesday at 6:00 p.m. (GMT) will witness the US Federal Reserve's interest rate decision, projected to remain steady at 5.50%. Economic forecasts and FOMC statements are scheduled for release at 7:00 p.m. (GMT), followed by a FOMC press conference at 7:30 p.m. (GMT).
On Thursday at 1:30 p.m. (GMT), the dollar in the pair may respond to the US retail sales report, with retail sales predicted to contract by 0.1% in November, mirroring the previous period.
Intraday technical picture:
Judging by the unfolding situation on the 4H chart of the GBP/USD pair, there is evident restrained price consolidation below the 1.2601 level. To gain clarity in terms of the price direction, we have to wait for the pair to establish its course in relation to this level.
The localized weakening of the US dollar on Tuesday, ahead of the release of crucial macroeconomic statistics from the US, set the stage for the potential recovery of the AUD/USD pair.
Possible technical scenarios:
According to the daily chart, AUD/USD is in a consolidation phase around the support at 0.6542 marked with dotted lines. If this level holds, the quotes are likely to sustain an upward trajectory toward the resistance at 0.6669. Alternatively, the breakout of 0.6542 and subsequent consolidation below it may pave the way for a southward movement towards the support at 0.6449, i.e. lower green dotted line.
Fundamental drivers of volatility:
The pair's movements this week will chiefly depend on the dynamics of the US dollar. That being said, some market response may be anticipated with the publication of the Australian labor market report on Thursday.
The US inflation report is scheduled for release on Tuesday at 1:30 p.m. (GMT). This is a pivotal indicator affecting market perceptions of the future trajectory of the Fed's monetary policy.
The culmination of the Fed meeting is expected on Wednesday at 6:00 p.m. (GMT), with the interest rate forecasted to remain steady at 5.50%. Market scrutiny will be intense for any comments or indications hinting at the future direction of interest rate changes. The FOMC press conference will follow the meeting at 7:30 p.m. (GMT).
Concluding the week, on Thursday at 1:30 p.m. (GMT), a United States retail sales report is anticipated. A contraction of 0.1% is expected, mirroring the previous month's figure, shedding light on the prospects for US economic growth amid a tight monetary policy.
Intraday technical picture:
As demonstrated by the 4H chart of the AUD/USD pair, it is apparent that for continued upward movement, the pair needs to consolidate above the December 8th highs. Achieving this consolidation will enable the price to continue rising towards the resistance at 0.6669.
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