The U.S. dollar dropped on Wednesday after the Fed expectedly hiked the interest rates by 0.25%, as the market players took notice of Jerome Powell’s dovish rhetoric.
In contrast, the EUR/USD pair went up. That being said, the results of the ECB meeting will be released on Thursday with the anticipated interest rate hike, which may affect the dynamics of the pair.
Possible technical scenarios:
On the daily chart, the EUR/USD pair has exited the 1.0808 - 1.0958 sideways range and attempts to consolidate above it today. If 1.0958 holds ground as support, this will open the way for the quotes toward the next target at 1.1121. This is a likely scenario provided that the Fed’s rhetoric is hawkish.
Facilitated by both the weakening euro and the rising dollar against the backdrop of strong U.S. employment figures on Friday, for instance, a return to the 1.0808 - 1.0958 corridor may be an alternative scenario.
Fundamental drivers of volatility:
The dynamics of the euro on Thursday will depend on the results of the European Central Bank’s meeting at 1:15 pm GMT, announced interest rate decisions, and its overall rhetoric. The market anticipates an interest rate hike from 2.50% to 3.0%. The ECB is also expected to release its monetary policy statement.
The European Central Bank will hold a press conference at 1:45 pm GMT.
Christine Lagarde, the president of the ECB is to speak at 3:15 pm GMT.
Following the Fed meeting’s results announced on Friday and the market’s response to it, the dynamics of the U.S. dollar will depend on the labor market figures which typically contribute to heightened volatility.
As suggested by consensus forecast, the United States Nonfarm Payrolls will total 185 thousand as compared to 223 thousand in the earlier period, along with an increase in the unemployment rate from 3.5% to 3.6%.
Intraday technical picture:
On the 4H chart of EUR/USD, we see that the increase stopped following the breakout of 1.0958. A pullback to this horizontal line and its confirmation as support is possible which will support further strengthening. It stands to mention that the spike in the euro volatility may alter the technical picture, especially against the backdrop of the European Central Bank’s decision.
Amidst the weakening U.S. dollar, the GBP/USD pair was able to recover. That said, the quotes remain within the sideways range, where they can either reverse or move upwards against the backdrop of today's anticipated interest rate hike by the Bank of England.
Possible technical scenarios:
On the daily chart, we can see that the GBP/USD pair grew within the corridor between the dotted support level at 1.2269 and the resistance at 1.2410. The strength of its upper boundary will now depend on the pound sterling’s response to the results of the Bank of England meeting, in particular the rhetoric regarding plans to tighten monetary policy. If consolidation above 1.2410 occurs, the next growth target will be 1.2601.
Fundamental drivers of volatility:
The meeting of the Bank of England is the critical event of Thursday’s trading session that may affect the currency pair. Its results will be announced at 12:00 pm GMT. The basic interest rate is expected to be hiked from 3.50% to 4.0%.
The minutes of the Monetary Policy Committee will be released at the same time.
Andrew Bailey, the Governor of the Bank of England is to speak at 2:15 pm GMT.
Friday’s focus will be on the U.S. labor market report for the month of January. The United States Nonfarm Payrolls are expected to hit 185 thousand as compared to 223 thousand in the earlier period, along with an increase in the unemployment rate from 3.5% to 3.6%.
Intraday technical picture:
On the 4H chart, the GBP/USD pair has a very small movement range to the resistance at 1.2410, whose true breakout hasn’t been possible since December. Amidst the upcoming news releases, it makes sense to keep an eye on the price position in terms of this horizontal line.
The weakening U.S. dollar is what boosted the AUD/USD pair this week. The price is currently below a strong technical level. The situation with it is likely to become clearer by the end of the week, which will determine the further technical potential of the pair.
Possible technical scenarios:
On the daily chart, AUD/USD quotes once again reached the resistance at 0.7138 and are putting its strength to the test. If consolidation above it happens, the price may continue to head toward the next target at 0.7283. In the event of a downward reversal, 0.7066 and 0.6967 will serve as the targets to the south.
Fundamental drivers of volatility:
We are expecting no critical news from Australia until the end of the week. At the same time, the U.S. dollar in the pair will be sensitive to the United States labor market figures as the January report is to be released on Friday.
The Nonfarm Payrolls in the United States are expected to hit 185 thousand as compared to 223 thousand in the earlier period, along with an increase in the unemployment rate from 3.5% to 3.6%.
Intraday technical picture:
On the 4H chart of the AUD/USD pair, there are technical prerequisites for further growth. Following Wednesday’s volatility spike, the quotes appear to be forming a bullish flag. If the pattern does appear after all, we can expect further increase towards the target at 0.7283
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