As we are coming to the end of the week, the EUR/USD pair is continuing its downward trend against the backdrop of a strengthening US dollar and weak stats from the euro area.
Possible technical scenarios:
As can be seen on the daily chart of the EUR/USD pair, the price is nearing the support at 1.0592, with minimal room for further downward movement at this particular level. Two potential scenarios are possible from this area: an upward reversal leading to a recovery towards the resistance at 1.0707 marked with dotted lines, or a breakout accompanied by consolidation below this level. In the latter scenario, the subsequent target to the south would be the support at 1.0492.
Fundamental drivers of volatility:
The primary underlying driver keeping the EUR/USD under pressure this week has been the strengthening of the US dollar. The Fed's rhetoric bolstered the value of the dollar: the US central bank paused its rate hikes in September but signaled that there might be another hike before the end of the year. As a result, the European Central Bank has likely finished its cycle of monetary policy tightening.
Intraday technical picture:
As evidenced by the 4H chart of the EUR/USD pair, successively descending lows and highs create prerequisites for reaching the support level at 1.0592. The emerging downward channel does not rule out the possibility that the price may initiate an upward correction from this level.
There is a clear predominance of fundamental factors favoring the US dollar, and as a result, the GBP/USD pair is trading under pressure.
Possible technical scenarios:
Judging by the unfolding situation on the daily chart, GBP/USD quotes fell below 1.2323. The existence of a downward trend lays the groundwork for further weakening, potentially targeting the nearest horizontal support at 1.2146.
Fundamental drivers of volatility:
This week, the value of the GBP/USD pair has gone down due to the combined effects of a strengthening US dollar and a depreciating British pound. On Thursday, after the Bank of England decided to keep interest rates unchanged, contrary to market expectations, sterling reached its lowest level against the US dollar since March.
On Friday, the pound fell again after reports showed a smaller-than-anticipated increase in UK retail sales in August. The number was up 0.4% from the wet month of July, which was somewhat below the predictions of the Reuters economists, who had predicted growth of 0.5%.
Intraday technical picture:
The price has reached the midpoint within the range between 1.2146 and 1.2323 on the 4H chart of the GBP/USD pair. The subsequent trajectory will hinge on whether the quotes can consolidate below the lows observed during Thursday's trading session.
Against the rising value of the US dollar and the dovish rhetoric of the Bank of Japan, on the one hand, and warnings from the Japanese government about possible currency interventions, on the other, the situation with the USD/JPY pair remains fragile.
Possible technical scenarios:
As we can see on the daily chart, the USD/JPY pair has been trading at 148.34 for the third consecutive day. The subsequent path of the price will be affected by its position relative to the weekly highs. If it consolidates above these highs, USD/JPY may proceed with its upward trajectory, potentially reaching the significant 150 yen per dollar mark, which could trigger intervention concerns. If the pair fails to consolidate above the weekly highs, it might revert towards the support at 146.93.
Fundamental drivers of volatility:
The general strength of the US dollar and the decline of the Japanese currency have both contributed to the growth of the USD/JPY pair this week.
After the Bank of Japan confirmed its low interest rate policy on Friday, the possibility of foreign exchange intervention grew and the yen's slide accelerated. Notably, Bank of Japan Governor Kazuo Ueda stated earlier this month that the central bank might have enough information by the end of the year to decide whether or not to cease the use of negative interest rates.
That being said, talk of a Tokyo intervention to prop up the yen's exchange rate may prevent the yen from falling any further.
Intraday technical picture:
As evidenced by the 4H chart, the USD/JPY pair is nearing yesterday’s highs. Should the price start falling from these levels, it could lead to the formation of a fresh local sideways range between the highs and lows of the preceding day.
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