The EUR/USD pair continues its recovery within a wide range, supported by a slight improvement in market sentiment. Meanwhile, investors remain heavily focused on the upcoming Federal Reserve meeting, as the central bank's rhetoric could significantly alter the dollar's momentum within the pair.
Possible technical scenarios:
As the daily chart demonstrates, the EUR/USD pair is sustaining its rebound from the 1.1494 support level, having sufficient room to move toward the dotted resistance at 1.1682. The asset's next move hinges on which side of the 1.1682 level it consolidates. If the pair successfully breaks above this point, the next upside target will be the 1.1788 resistance.
Fundamental drivers of volatility:
Expectations surrounding Fed policy and the resilience of the US economy are currently having a stronger impact on EUR/USD than the European Central Bank's actions.
The interest rate differential between the US and the Eurozone remains a core driver. Although the two-year swap rate differential continues to favor the euro, the market is hesitating to aggressively build long positions in the single currency.
A sluggish economic backdrop across the Eurozone continues to weigh on the euro. Slowing growth across the region diminishes the appeal of European assets, capping the single currency's upside potential even amid more hawkish rhetoric from the ECB.
Concurrently, the Fed's stance remains a pivotal catalyst for EUR/USD. Any indications that US interest rates will remain higher for longer will support the dollar, as the American regulator's decisions steer not only the currency market but global capital flows as well.
In the near term, risks for the pair lean to the downside. Renewed skepticism regarding Middle Eastern agreements, delays in fully reopening the Strait of Hormuz, or a wider macroeconomic divergence between the US and the Eurozone could boost safe-haven demand for the greenback and trigger a selloff in EUR/USD.
Intraday technical picture:
Given the unfolding scenario on the 4H chart, EUR/USD has pulled back into the 1.1575-1.1682 range, while having enough room to run toward its upper boundary.
The GBP/USD pair is trading moderately, as investors opt for caution ahead of fresh geopolitical developments and decisions from major global central banks. The market's main focus is locked on the US-Iran negotiations alongside the upcoming policy meetings of the Federal Reserve and the Bank of England.
Possible technical scenarios:
On the daily chart, the pair’s trajectory appears highly uncertain. GBP/USD is trading in the middle of a large symmetrical triangle, rapidly approaching a breakout point. The price could exit this pattern in either direction. On top of that, there remains plenty of room to maneuver within the triangle toward each of its respective boundaries.
Fundamental drivers of volatility:
Market sentiment is drawing support from progress in resolving the Middle East situation. US Vice President JD Vance stated that transit through the Strait of Hormuz would not face additional levies and that international inspectors would be permitted to return to Iran. That being said, market players are waiting for official confirmation of these agreements from Tehran.
The upcoming Fed meeting remains front and center. While the US regulator is widely expected to hold interest rates steady, investors will closely analyze comments from the new Fed Chair, Kevin Warsh. Any dovish policy hints could pressure the greenback and support GBP/USD.
Thursday's Bank of England rate decision will provide an additional catalyst for the pair. With the market fully pricing in a hold at current rate levels, the focus shifts entirely to the accompanying statement, meeting minutes, and the MPC voting breakdown.
In view of the above, the future direction of GBP/USD will depend on the rhetoric coming out of both the Fed and the BoE. Dovish signals from the US central bank, coupled with a steady stance from the BoE, could support the pound, whereas cautious commentary from the British central bank may cap any upside potential.
Intraday technical picture:
Locally, the 4H chart suggests that the pair is continuing to recover within a local sideways range between 1.3304 and 1.3484, leaving the price with sufficient room to climb toward the upper boundary.
The USD/JPY pair is hovering near multi-week highs. That being said, the pressure on USD/JPY intensified slightly following the Bank of Japan's decision to hike interest rates. Investors are now assessing the prospects of further BoJ tightening while bracing for the outcome of the Fed meeting, which could set the pair's trend for the coming weeks.
Possible technical scenarios:
The USD/JPY pair is consolidating just below the resistance level of 160.00 yen per dollar, a zone where potential currency intervention by Japanese authorities could trigger a downside reversal. The immediate support rests at 158.93.
Fundamental drivers of volatility:
On Tuesday, the primary catalyst for the Japanese yen was the Bank of Japan's decision to hike its benchmark interest rate by 25 basis points to 1%. The central bank reasserted its commitment to monetary policy normalization, noting that inflation remains above target and risks of a severe economic slowdown have diminished.
The yen caught an extra bid from remarks by BoJ Deputy Governor Shinichi Uchida, who stated that the regulator stands ready to hike rates further depending on economic performance, inflation trends, and overall financial conditions. These hawkish signals reinforce expectations of ongoing tightening and narrow the yield differential between Japan and the US.
At the same time, the yen's appreciation potential is currently restricted by expectations surrounding US monetary policy. The market is virtually certain that the Fed will keep rates unchanged on Wednesday. However, market participants will highly scrutinize comments from the newly appointed Chairman, Kevin Warsh, regarding the future path of interest rates.
Thus, in the short term, USD/JPY dynamics will be dictated by the interplay between a more hawkish BoJ and expectations surrounding Fed policy. Should the US regulator maintain a cautiously hawkish tone, the dollar could hold close to its current highs. Conversely, any hints of a softer stance from the Fed could accelerate a corrective pullback in the pair amid mounting expectations of subsequent rate hikes in Japan.
Intraday technical picture:
As evidenced by the 4H chart, USD/JPY is forming a tight sideways range between 159.76 and 160.41 marked with two dotted lines. A downside reversal away from its upper boundary is currently possible, which could weaken the price toward local support at 159.76.
The USD/CAD pair is trading close to multi-week highs. The US dollar is drawing support from anticipation ahead of the Fed meeting, while a drop in crude oil prices is limiting the Canadian dollar's ability to mount a recovery.
Possible technical scenarios:
The daily chart shows that the USD/CAD pair has hit resistance at 1.4013. If the price undergoes a downside reversal from this level, the immediate downside target will be the dotted support line at 1.3958. Alternatively, a breakout and consolidation above 1.4013 will clear a path toward the 1.4108 target.
Fundamental drivers of volatility:
The primary weight on the Canadian dollar remains the softening crude oil market. Despite reports concerning a signed memorandum between the US and Iran to defuse conflict and resume shipping through the Strait of Hormuz, investors are staying cautious due to the lack of an official text. This has tempered expectations of a swift recovery in the energy sector.
Because a substantial portion of Canada's export revenue is tied to energy shipments, lower oil prices traditionally act as a headwind, reducing the appeal of the loonie.
The upcoming US Federal Reserve meeting also remains a central focus for the market. The central bank is widely tipped to leave interest rates unchanged; however, investors will thoroughly parse comments from the new Fed chief, Kevin Warsh, for clues on the future trajectory of monetary policy. Any signs that rates will stay higher for longer could provide an extra tailwind for the dollar.
Aside from that, cooling energy prices are easing fears of a fresh inflationary spike, lowering the probability of aggressive tightening by the Bank of Canada. Against this backdrop, the diverging policy outlooks between the Fed and the BoC continue to favor a strong USD/CAD position over the near term.
Intraday technical picture:
Given the current developments on the 4H chart, a bearish double top reversal pattern is emerging just below the 1.4013 resistance. Should this pattern play out, it could spark a breakout of the dotted support at 1.3958, leading to further downside toward 1.3861.
Gold is recovering from its recent decline as expectations for further aggressive Fed tightening begin to cool. The precious metal found support on news of an interim agreement between the US and Iran, which has smoothed out inflationary risks and prompted market participants to recalibrate their interest rate forecasts.
Possible technical scenarios:
The price of gold is currently holding just below the 4375.25 level. If the asset can establish a firm foothold above it, the next upside target for its recovery will be 4635.63.
Fundamental drivers of volatility:
A key catalyst behind gold's rebound is the fading probability of additional Fed rate hikes. Following headlines regarding the US-Iran accord, investors scaled back bets on a December rate hike, as cooling geopolitical tensions reduce the risk of accelerating inflation. A more dovish shift in monetary policy expectations is historically bullish for non-yielding gold.
The precious metal is catching an additional tailwind from receding inflationary fears. The reopening of the Strait of Hormuz and prospects for normalized energy supplies are easing pressure on global commodity prices, lowering the likelihood that interest rates will need to remain elevated for an extended period. This enhances gold's appeal as an alternative safe-haven asset.
Market attention is now locked onto the upcoming Fed meeting, marking the first session led by the new Chairman, Kevin Warsh. Investors will scan the commentary for any hints of a softer tone. Any dovish signals could act as an additional catalyst for gold prices.
The long-term fundamental backdrop remains highly supportive. According to a survey by the World Gold Council, 45% of central banks intend to expand their gold reserves over the next 12 months. This sustained, robust institutional demand from global reserve managers continues to support interest in gold as a capital preservation and diversification tool.
Intraday technical picture:
Within the 4002.27-4375.25 range, an inverse head and shoulders reversal pattern appears to be forming. The confirmation of this pattern would entail a breakout of the 4375.25 resistance, opening the door for a subsequent recovery toward the 4635.63 level.
Brent crude prices remain under pressure after hitting three-month lows, weighed down by expectations of a supply restoration through the Strait of Hormuz and signs of softening global demand. The market is steadily stripping away the geopolitical risk premium following signs of de-escalation between the US and Iran.
Possible technical scenarios:
Judging by the look of things on the daily chart, Brent is testing the 81.39 support level. A consolidation below this floor will open the door for the quotes towards the next support level at 77.03.
Fundamental drivers of volatility:
The dominant bearish catalyst is the anticipated resumption of oil exports through the Strait of Hormuz, a vital maritime artery that normally handles roughly 20% of global petroleum supplies. Following announcements of a tentative US-Iran deal, investors began pricing in a gradual return of raw supply flows, mitigating structural deficit risks.
Prospects of increased output from Gulf nations are compounding the downside pressure. Several analysts project that export volumes could return to pre-conflict levels within the coming months. Consequently, several investment banks have revised their Brent forecasts lower, anticipating a more balanced demand-supply dynamic.
Weak demand data coming out of China continues to act as a significant headwind for the energy complex. Crude imports by the world’s top buyer plunged 29% in May, hitting an eight-year low and intensifying concerns over a broader economic slowdown in energy consumption.
That said, the risk of heightened volatility remains on the table. The finer details of the impending US-Iran accord are still opaque, and restoring full navigation through the Strait of Hormuz could take several weeks. As a result, any implementation bottlenecks or unexpected geopolitical flare-ups could quickly trigger an upside bounce in crude quotes.
Intraday technical picture:
Given the situation on the 4H chart, Brent is attempting to establish a foothold below the 81.39 level. This technical development sets the stage for a further decline toward the 77.03 target.
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