The EUR/USD pair has been trading with a subdued tone for the third consecutive session, awaiting more clarity on the future steps of the Federal Reserve and the ECB regarding interest rates.
Possible technical scenarios:
Judging by the unfolding situation on the daily chart, the EUR/USD pair is holding below the support level of 1.0888 that has been recently broken out. Should the pair revisit the lows observed during Wednesday and Thursday's trading sessions, it could extend its decline toward 1.0801.
Fundamental drivers of volatility:
The persistent strength of the US dollar for the second consecutive week is exerting pressure on the EUR/USD pair. The resilience displayed by the US economy and the Federal Reserve's cautious stance on rate cuts have diminished market expectations for an imminent and drastic reduction in interest rates. Currently, investors assess the probability of a US rate cut in March at 57%, down from 75% the previous week.
Intraday technical picture:
As evidenced by the 4H chart, the EUR/USD pair remains in consolidation between the week's lows and resistance at 1.0888. The subsequent price movement will hinge on the direction in which the pair exits this range.
The GBP/USD pair has rebounded from this week's lows, setting the stage for potential technical recovery.
Possible technical scenarios:
Observing the daily chart, it is evident that the GBPUSD pair made an upward retreat from the support level at 1.2608 and consolidated below the subsequent horizontal level at 1.2656. With this, there is still room for the price to advance towards the resistance at 1.2792.
Fundamental drivers of volatility:
Towards the week's conclusion, UK data proved unfavorable for the pound. Retail sales reported on Friday indicated a 3.2% decline in the December-November period, marking the most significant drop since January 2021, with sales reaching their lowest point since May 2020.
Meanwhile, the US dollar sustained its positive momentum for the second consecutive week, as macroeconomic indicators and Federal Reserve statements tempered expectations of an immediate rate cut.
Intraday technical picture:
As it appears from the 4H chart of the GBP/USD pair, a series of progressively higher highs and lows has emerged above the 1.2656 level, substantiating the potential for further upward movement toward the resistance at 1.2792.
The USD/JPY pair is persisting in its upward trajectory, propelled by the ongoing weakness of the yen and the strengthening of the US currency.
Possible technical scenarios:
Examining the daily chart, the USD/JPY pair has reached the upper boundary of the range between 146.37 and 148.80. From a technical standpoint, there are two possibilities: a decline within the lateral range or a breakthrough of the 148.80 level, followed by consolidation above it. In the latter case, further growth may extend to the 150 yen per dollar area.
Fundamental drivers of volatility:
The rise of the U.S. dollar continues to exert pressure on the Japanese yen, with signs of resilience in the U.S. economy and the Federal Reserve's cautious stance on rate cuts dissuading speculation about swift and substantial interest rate reductions. Market expectations for a US rate cut in March have dropped to 57%, down from 75% the previous week.
In the meantime, the Minister of Finance of Japan Shunichi Suzuki, when asked about the yen's sharp decline, stated on Friday that the government is closely monitoring the currency's behaviour.
The dollar has appreciated nearly 5% against the yen since the beginning of the year, as market expectations waned due to the Bank of Japan having no immediate plans to terminate negative interest rates.
Intraday technical picture:
As we can see on the 4H chart of USD/JPY, the pair has retraced from the resistance at 148.80 but has not yet revisited the lows from Thursday's trading session. If it fails to drop below this extremum, there is a potential for the pair to rebound to the resistance level and put its strength to the test.
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