The EUR/USD pair is recouping some of its losses from last week, but market players remain wary ahead of Wednesday's Federal Reserve rate announcement.
Possible technical scenarios:
Judging by the unfolding situation on the daily chart of the EUR/USD chart, the pair has retraced to the resistance level at 1.0707 and is currently putting its strength to the test. If the price successfully consolidates above this level, the subsequent recovery targets to watch for are at 1.0765 and 1.0808. An alternative scenario involving a decline could see a return to last week’s lows, with the support level at 1.0592 coming into focus.
Fundamental drivers of volatility:
Investors' focus has switched to the Federal Reserve meeting, the results of which will be announced on Wednesday at 6:00 p.m. (GMT), after the European Central Bank (ECB) hiked rates last week and likely completed its tightening cycle.
The Federal Reserve has not yet finished raising rates, at least judging by the existing rhetoric, but it is widely expected that it will pause in September and keep rates at their current level of 5.50%.
Jerome Powell will hold a press conference at 6:30 p.m. (GMT) on Wednesday, and the FOMC's economic projections and FOMC Statement will be released at the same time. The dollar's volatility may increase depending on the tone of the statements. The future trajectory of the US dollar is closely linked to the Federal Reserve's intentions regarding potential interest rate hikes later this year.
Intraday technical picture:
As can be seen on the 4H chart of the EUR/USD pair, the local trajectory of the pair hinges on whether the dotted level at 1.0707 persists as a resistance. The price is currently at a critical crossroads, and there is a chance that it may either revisit previous lows or continue to recover.
Market players are being cautious in the first half of the week as the GBP/USD pair experiences fairly muted dynamics ahead of the Fed and Bank of England meetings.
Possible technical scenarios:
Looking at the daily chart, GBP/USD quotes are currently in a consolidation phase below 1.2410. If the price succeeds in consolidating above this level, the subsequent objective for recovery will be the resistance marked with dotted lines at 1.2525. On the other hand, an alternative possibility might involve a drop toward the support level at 1.2323.
Fundamental drivers of volatility:
The direction of the GBP/USD pair this week will be dictated by two major central banks: the Federal Reserve on Wednesday and the Bank of England on Thursday.
On Wednesday at 6:00 p.m. (GMT), the results of the Federal Reserve's two-day monetary policy meeting will be released. Later today at 6:30 p.m. (GMT), Fed Chair Jerome Powell will be holding a press conference. While the FOMC is not likely to hike the basic interest rate from its current level of 5.50%, its economic projections and rhetoric surrounding the possibility of another tightening of monetary policy before the end of the year could cause the value of the US dollar to fluctuate more wildly.
The decisions made by the Bank of England at its meeting on Thursday will have an effect on the value of the pound and will be revealed at 11:00 a.m. (GMT). The current cycle of interest rate hikes is predicted to end with a rate increase of 0.25%, from 5.25% to 5.50%.
Intraday technical picture:
As evidenced by the 4H chart of the GBP/USD pair, consolidation below 1.2410 points to local uncertainty and cautious sentiment. Which side of this boundary the price eventually settles on is a technical indicator of the price's future movement.
Slowly but surely, the AUD/USD is climbing back from its August lows. If the US dollar doesn't keep getting stronger, we could see more price increases.
Possible technical scenarios:
As evidenced by the daily chart of the AUD/USD pair, the pair is currently putting the strength of the resistance of the sideways range between 0.6364 and 0.6451 to the test. Should it manage to solidify its position above this range, it is likely to extend its upward trajectory toward the subsequent target at 0.6537.
Fundamental drivers of volatility:
This week, Australia is not likely to release any news that will cause a large increase in volatility. The outcomes of the two-day meeting will be announced on Wednesday at 6:00 p.m. (GMT), followed by a speech by Central Bank Governor Powell at 6:30 p.m. (GMT), all of which will have a significant impact on the value of the US dollar.
However, the market players will keep a close eye on the tone of the statements made and consider the possibility of another rate hike this year, maybe at the November meeting, even if the market has already factored in the likelihood that the key interest rate would remain steady at 5.50%.
Intraday technical picture:
Looking at the four-hour chart of AUD/USD, it is safe to say that there is a pattern of ascending lows, indicating a potential setup for continued upward movement. If the pair manages to consolidate above the September 15 highs, it may pave the way for a move toward the nearby resistance level at 0.6537.
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