The EUR/USD pair is nearing a yearly high, driven by improved risk appetite and a weakening US dollar.
Possible technical scenarios:
The pair has climbed above 1.1138 but has yet to surpass the August 23 highs. If those highs are updated, the uptrend could extend toward the 1.1247 target. That being said, if the resistance holds, a retracement toward the 1.1064 support level may occur.
Fundamental drivers of volatility:
Improved market sentiment, bolstered by large-scale economic stimulus measures in China, has strengthened the euro. Simultaneously, this has reduced demand for the US dollar. Additionally, growing expectations of a Fed rate cut in November are weakening the dollar's stance in the pair.
The CME FedWatch tool indicates a 60% chance of a 50-basis point rate cut in November, further fueling expectations of easing monetary policy.
This week, investors will closely monitor the Personal Consumer Expenditures (PCE) price index on Friday and Durable Goods Orders on Thursday. A projected 2.6% decline in new orders could pressure the dollar and drive further gains for the EUR/USD pair.
Intraday technical picture:
As evidenced by the 4H EUR/USD chart, a cautious reversal from the 1.1200 resistance is evident. The price now has room to move towards the 1.1138 support level.
The GBP/USD pair hit multi-month highs this week but has since pulled back, giving up some of those gains.
Potential technical scenarios:
Judging by the unfolding situation on the daily chart, the pair is attempting to stabilize above the 1.3359 level that was broken out. If it successfully holds, this could pave the way for further growth toward the 1.3517 resistance. However, if the breakout proves to be false, a pullback to the 1.3141 support level is possible.
Fundamental drivers of volatility:
The pound reached its highest level since March 2022 this week, driven by reduced expectations of aggressive rate cuts from the Bank of England, unlike the Federal Reserve. However, the pound later retraced some of its gains.
Traders are now focusing on the US Personal Consumption Expenditures (PCE) inflation data, set to be released on Friday, which may provide insight into the Fed's future policy direction and influence the dollar's movements in the pair.
Intraday technical analysis:
According to the 4H GBP/USD chart, the pair has retreated to the 1.3359 support level. It’s uncertain whether this level will hold. From here, the price could either bounce back and continue upward or drop below the level, leading to a decline toward the 1.3141 horizontal level.
The USD/JPY pair is facing pressure as the US dollar weakened following disappointing consumer confidence data from the US on Tuesday, heightening uncertainty around the Federal Reserve's next moves.
Possible technical scenarios:
The daily chart shows that USD/JPY is attempting to consolidate above the 143.39 level. However, the price has yet to surpass Friday’s highs. If it manages to do so, the next target would be the 145.21 resistance level, followed by 146.37 if that’s breached.
Fundamental drivers of volatility:
On Wednesday, the Japanese yen dipped slightly against the US dollar as market participants kept a close watch on possible shifts in the Bank of Japan’s (BoJ) monetary policy. The Governor of the BoJ Kazuo Ueda emphasized that the bank has ample time to assess economic and market conditions, downplaying the need for immediate rate hikes.
With real interest rates staying relatively low, the current environment continues to support economic activity and price increases. Investors are eagerly awaiting Thursday’s release of BoJ meeting minutes and Friday's Tokyo inflation data for more insight into the bank’s future policy direction.
Intraday technical picture:
On the 4H USD/JPY chart, resistance is visible at the 144.34 level, marked with a dotted line. A pullback to the support level of 143.39 is possible from here. Should the pair consolidate above 144.34, the next target would be 145.21.
The AUD/USD pair has climbed this week, supported by a stronger Australian dollar, which reacted positively to stimulus measures implemented in China.
Possible technical scenarios:
As we can see on the daily chart, AUD/USD has reached the resistance level of 0.6893 and is attempting to overcome it. If the pair consolidates above this level, further growth towards 0.6994 is possible. If it fails to make a true breakout, a pullback to the support at 0.6777 is likely.
Fundamental drivers of volatility:
On Tuesday, the Reserve Bank of Australia (RBA) held its key interest rate at 4.35%, reaffirming its commitment to fighting inflation. RBA Governor Michele Bullock clarified that no rate cuts are planned in the near future, even though inflation is slowing. This decision added market uncertainty, as many investors had anticipated potential policy easing.
Recent data showed inflation dropped to 2.7% in August, the lowest in three years. Despite this progress, the RBA remains cautious, aiming for a steady return to its 2-3% target range. While the Australian dollar initially hit its highest level since February, it later corrected due to signs of easing inflationary pressure.
Intraday technical picture:
Judging by the look of things on the 4H chart, AUD/USD shows a local reversal from the 0.6893 level, suggesting a continuation of the downward correction, potentially reaching the support at 0.6777.
Oil prices have remained in positive territory through the first half of the week, driven by improving market sentiment and expectations of rising demand.
Possible technical scenarios:
On Brent's daily chart, the price is nearing a strong resistance level at 75.18. If it manages to overcome and consolidate above it, the next growth target will be 77.25. However, if it fails to clear 75.18, a downward reversal could send prices back to the support level at 70.85.
Fundamental drivers of volatility:
Oil prices stabilized on Wednesday as investors reassessed the effectiveness of China’s economic stimulus measures. While reduced oil and fuel reserves in the U.S. have provided some support, there are lingering concerns that China's stimulus may not be enough to sustain economic growth, dampening optimism.
On Tuesday, prices rose by 1.7% following China’s announcement of rate cuts and government financing. However, according to the American Petroleum Institute (API), U.S. oil reserves dropped by 4.34 million barrels—an amount insufficient to spark a significant price rally.
Low trading volumes persist, largely influenced by declining U.S. consumer confidence, which has hit a three-year low.
Intraday technical picture:
The 4H Brent chart shows a pattern of higher highs and lows, suggesting the current pullback from resistance at 75.18 could be a temporary correction. If the price consolidates below the September 23 lows, it could retest the support level at 72.45.
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