EUR/USD keeps climbing, hitting a four-month peak above 1.0900, driven by the euro's increasing strength and the US dollar's ongoing decline.
Possible technical scenarios:
As we can see on the daily chart, EUR/USD is approaching the resistance of a wide range between 1.0638 and 1.0938. If the price manages to break above this range, the next target for growth will be the level of 1.1191. Otherwise, a downward correction from the 1.0938 level may occur.
Fundamental drivers of volatility:
The euro is supported by the prospect of easing budget constraints in Germany. The Green Party, led by Franziska Brantner, expressed readiness to negotiate to expand the borrowing limit, which could speed up the country’s economic recovery.
Another driver for euro growth has been revised expectations for ECB rates. Traders are now less confident about two rate cuts by the summer, as steady inflation in the eurozone reduces the need for aggressive monetary easing.
On the other hand, the US dollar is under pressure. The DXY index reached a four-month low amid concerns about the US economic slowdown, particularly due to potential tariff measures. The market is pricing in a 51% chance of a Fed rate cut in May, contributing to the greenback's sell-off.
Key data for the week include US inflation and the JOLTS job report. These may influence expectations for Fed rates and determine the future direction of EUR/USD.
Intraday technical picture:
Judging by the unfolding situation on the 4H chart of EUR/USD, the pair is approaching resistance at 1.0938, where it can either test this level amid US dollar weakness or turn downward. In the latter case, a decline to the support at 1.0777 is possible.
The pound sterling continues to strengthen against the US dollar, trading around 1.2900 ahead of the US inflation data.
Possible technical scenarios:
The daily chart shows that GBP/USD is consolidating above the support at 1.2862, which creates the prospects for further growth toward the target at 1.3147.
Fundamental drivers of volatility:
The key factor supporting the GBP is investor confidence that the Bank of England will keep the current interest rate for a longer period, driven by wage growth and stable inflation in the UK services sector.
The Bank of England's rhetoric remains balanced: most representatives support gradual policy easing, while Catherine Mann advocates for a more decisive rate cut. Investors are also keeping a close eye on UK GDP data, which will reveal the pace of economic growth after 0.4% in December.
The GBP/USD pair is also supported by the weakening US dollar, driven by fears of a slowdown in the US economy due to Donald Trump's tariff policy. The DXY index recently reached a minimum of around 103.30, and the probability of a Fed rate cut in May has increased to 51% amid a possible slowdown in inflation.
Critical fundamental drivers this week will include US inflation data (with core CPI expected to decrease to 3.2%) and the JOLTS job report. These events could influence the further dynamics of the GBP/USD pair in the coming days.
Intraday technical picture:
As evidenced by the 4H chart of GBP/USD, the price is consolidating in a narrow range between 1.2862 and 1.2944. US news this week could serve as a driver for breaking out of this range. A consolidation above the resistance at 1.2944, marked by a dotted line, would allow the pair to continue its upward movement toward the next target of 1.3147.
USD/JPY is consolidating after the recent rise in the yen, which reached its highest level since October.
Possible technical scenarios:
According to the daily chart, USD/JPY has fallen below 148.63 and is heading toward support at 145.91. If this support fails, the next target for a downside move would be 143.45.
Fundamental drivers of volatility:
Expectations of further interest rate hikes by the Bank of Japan, supported by stable inflation, are the key driver behind the yen's strengthening in this pair. Despite the downward revision of Japan's GDP for Q4, investors remain confident that the central bank may tighten its policy as early as May.
Additional support for the yen is coming from global demand for safe-haven assets amid heightened market uncertainty. In the meantime, the US dollar is under pressure, trading near multi-month lows due to expectations of aggressive easing of the Fed's policy. The slowdown in the US economy and ongoing trade tensions increase the likelihood of a rate cut by the Fed, limiting the upside potential of USD/JPY.
The primary factor for the future movement of the pair will be the publication of inflation data in the US. If the data confirms the weakening of inflation, the dollar may continue to decline, strengthening the yen's position.
Intraday technical picture:
Judging by the look of things on the 4H chart of USD/JPY, the price is currently in the middle of the range between 145.91 and 148.63. Given the series of decreasing highs and lows, the downward trend is likely to continue, making a move toward the 145.91 level more probable.
The USD/CAD pair remains under pressure, trading around 1.4440, as the US dollar weakens amid concerns about an economic slowdown.
Possible technical scenarios:
The daily chart of USD/CAD demonstrates that the price has reached resistance at 1.4468 and is retreating from it. From this point, the price may decline toward support at 1.4271. An alternative scenario is a rise toward the target at 1.4541.
Fundamental drivers of volatility:
Donald Trump’s statements about the "transition period" of the US economy have raised market concerns, while uncertainty around tariff policies and the possibility of a recession limit the upside potential for the USD.
Investors are awaiting the Bank of Canada’s rate decision, with expectations for a 25 bps cut to 2.75%. This partially restrains the strengthening of the Canadian dollar. However, trade uncertainty and potential further actions by the Bank of Canada may influence the pair's dynamics.
Aside from that, markets are focused on the upcoming release of US inflation data. If the CPI shows that inflation pressures are easing, this could increase expectations of easing by the Fed, potentially putting additional pressure on the USD/CAD.
Intraday technical picture:
According to the developments on the 4H chart, USD/CAD is reversing lower from the resistance at 1.4468, which opens the way for the pair to reach the support at 1.4271.
Gold continues to recover from a weekly low, trading near $2900, amid growing demand for safe-haven assets.
Possible technical scenarios:
As we observe on the daily chart, the price of gold is consolidating in a narrow range between 2891.30 and 2923.23. If the US dollar continues to decline, XAU/USD may break out of this sideways trend and continue its growth toward the target of 2956.39.
Fundamental drivers of volatility:
Geopolitical risks and concerns about US protectionist policies are fueling increased interest in gold, while expectations of a Fed rate cut are putting pressure on the US dollar.
The weakness in the US economy and the potential slowdown in the labor market spark speculation about a new round of monetary easing, keeping US bond yields low. This creates a favorable environment for gold, which traditionally trades inversely with the dollar. Key events this week include the release of US inflation data, which will shape the future dynamics of the dollar and, consequently, the direction of XAU/USD.
Intraday technical picture:
Based on the 4H chart of XAU/USD, the price is recovering within the range between 2891.30 and 2923.23, with some room to move toward the upper limit. If the 2923.23 level cannot be overcome, the pair may continue its sideways movement until significant volatility catalysts appear.
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