Due to the strengthening of the US dollar, the EUR/USD currency pair declines as the week comes to a close.
Possible technical scenarios:
As can be seen on the daily chart, the EUR/USD pair has hit support at 1.0958 and is currently putting its strength to the test. If the price manages to hold above this level, a recovery to the resistance at 1.1121 is likely. As an alternative scenario, there may be a consolidation below the support at 1.0933 and a drop to 1.0808.
Fundamental drivers of volatility:
While the remarks from the European Central Bank and the Federal Reserve indicated that interest rates would be going up this week, the tones were rather vague, and the central bank chairs hinted at a possible pause in rate hikes in September.
The likelihood of a recession, however, decreased on Thursday as shown by solid data from the United States. As a result, expectations that the Fed would halt its rate hikes fell. In this environment, the strength of the US dollar resulted in a decline in the value of the EUR/USD.
Investors are now waiting for the United States states to forecast the Federal Reserve's next move. Personal spending information in the United States will be released today at 12:30 PM GMT.
It is anticipated that the core PCE price index will fall from 0.3% to 0.2% month-over-month and from 4.6% to 4.2% year-over-year
Meanwhile, the expenses of individuals in June will rise by 0.4%, up from the 0.1% increase seen in May.
Intraday technical picture:
As evidenced by the 4H chart of the EUR/USD pair, the price is still holding above the support of the corridor between 1.0958 and 1.1121, which indicates that a recovery is still a possibility if the US dollar fails to continue its upward trend.
On Thursday, the GBP/USD lost ground as optimistic US data buoyed the greenback.
Possible technical scenarios:
The daily chart demonstrates that the GBP/USD pair reached the support at 1.2785, and the pair is now seeking to recover from that point once more. If the level manages to hold, there is a chance of a recovery to the level of resistance located at 1.2957.
Fundamental drivers of volatility:
The key factor influencing the pair's dynamics this week was the volatility of the US dollar. After dropping on Wednesday in response to the Fed's neutral comments, the US dollar retraced all of its gains on Thursday. The catalyst was optimistic economic reports coming out of the United States. In light of this, the Federal Reserve may continue to increase interest rates further.
Data on US personal consumption spending is scheduled for release today at 12:30 PM GMT, which may also affect the dynamics of the dollar in the pair.
Monthly PCE price growth is predicted to slow to 0.2% from 0.3% and yearly PCE price growth is predicted to slow from 4.6% to 4.2%. At the same time, the expenses of individuals are predicted to rise by 0.4% per month, up from 0.1% previously.
Intraday technical picture:
Judging by the look of things on the 4H chart of the GBP/USD pair, the price is currently making a reversal following a false breakout of the support at 1.2785, which paves the way for a price recovery from a technical standpoint.
On Friday, during the Bank of Japan's announcement, the USD/JPY pair fluctuated erratically, but by the European session, quotes had moved into the green zone.
Possible technical scenarios:
USD/JPY reached support at 137.89 today, but the price is currently attempting to maintain its position above 139.38. As a result, there is a technical possibility that it will recover to the level of 140.22. In the event that this does not occur, the price will go back to 137.89.
Fundamental drivers of volatility:
The Bank of Japan maintained its ultra-low interest rates on Friday, contributing to the USD/JPY pair's volatility resulting from the Japanrse yen increase. However, the central bank made minor adjustments to its management of the yield curve. 10-year government bond yields are currently considered a "benchmark" with a ceiling of 0.5%. Instead, the central bank suggested purchasing such bonds at 1% interest.
In response, the US dollar appreciated by the week's end thanks to robust US data that cast further doubt on the idea that the Fed had completed its rate-hike cycle.
Intraday technical picture:
On the 4H chart, we can see that the USD/JPY pair has moved into the range between 139.38 and 140.22, which lays the groundwork for a potential recovery in the currency pair from a technical perspective.
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