The US dollar faced consistent downward pressure throughout the month, marking its most substantial monthly loss in a year. Consequently, it is hovering near a three-month low, contributing to the continuous upward trend of the EUR/USD pair.
Possible technical scenarios:
As we can see on the daily chart, the EUR/USD's attempt to exit upwards from the sideways range between 1.0808 and 1.0958 has not succeeded. The quotes have retreated below the level of 1.0958, and if the breakout proves to be false, a further decline towards the support at 1.0808 could be anticipated.
Fundamental drivers of volatility:
The primary market driver remains the shift in investor expectations concerning the Federal Reserve's future monetary policy actions. The current pricing reflects an expectation of a pause in rate hikes at the December meeting and the conclusion of the tightening cycle.
Traders are now focusing on the possibility of a rate cut next year, with the probability of a cut of at least 25 basis points in March 2024 standing at around 44%, according to CME Group's FedWatch tool.
Chair of the Federal Reserve of the United States Jerome Powell is scheduled to deliver a speech on Friday at 4:00 p.m. (GMT), potentially providing clarifications on the central bank's future steps, which could impact the dynamics of the US dollar.
Intraday technical picture:
The 4H chart of EUR/USD illustrates the formation of a local upward trend, currently undergoing a downward correction. If the pair is not halted by channel support (approximately at the intersection with the support at 1.0895 marked with dotted lines), the decline may persist toward the level of 1.0808.
The GBP/USD pair is demonstrating an upward trend, primarily driven by the depreciation of the US dollar. The pair's dynamics, as indicated by market sentiment, are likely to remain contingent on the direction of the American currency.
Possible technical scenarios:
Judging by the unfolding situation on the daily chart of GBP/USD, the pair has gone up to the midpoint of the sideways range between 1.2601 and 1.2785. A retracement to its support may trigger an upward reversal, setting the stage for further growth toward 1.2785.
An alternative scenario involves a breakout of the 1.2601 level and consolidation below it, paving the way for a southern trajectory toward the horizontal level at 1.2410.
Fundamental drivers of volatility:
Governor of the Bank of England Andrew Bailey, in multiple speeches this week, emphasized that achieving 2% inflation remains a challenge. In this context, discussions about potential rate cuts are deemed premature. Therefore, there are currently no fundamental drivers for pound depreciation.
On the flip side, the pair finds support in the weakening US dollar, reaching a three-month low amid expectations of a Fed rate cut in 2024. Market expectations, indicating a likelihood of a rate cut of at least 25 basis points in March 2024 at around 44%, according to CME Group's FedWatch tool, contribute to the pressure on the US currency.
The remarks from Fed Chair Powell, scheduled for Friday at 4:00 p.m. (GMT), may provide clarification, reinforcement, or contradiction to these sentiments.
Intraday technical picture:
As evidenced by the 4H chart, the GBP/USD pair's retracement from weekly highs within the range between 1.2601 and 1.2785 sets the stage for reaching support at 1.2601. The local price direction will hinge on whether this boundary holds.
The depreciation of the US dollar contributed to a decline in the USD/JPY pair. That being said, following the release of stronger-than-expected US GDP data, the quotes reversed their direction, moving upward.
Possible technical scenarios:
Analyzing the daily chart of the USD/JPY pair, it is evident that the support at 146.93 is holding, with any breakout proving to be false. If this support level holds, there is potential for the pair to rebound towards the resistance at 150 yen per dollar. Alternatively, if the price consolidates below 146.93, it might continue its descent towards 144.98.
Fundamental drivers of volatility:
The Japanese yen's weakness persists, and there haven't been significant shifts in the Bank of Japan's stance, with officials claiming that discussions about abandoning negative rates are premature. On the other hand, the decline in the dollar within the pair exerts pressure on the price. Should the US dollar reach three-month lows, driven by expectations of a Fed rate cut in 2024, the pair could continue its downward trajectory until there is a reversal in the US currency.
Intraday technical picture:
As we can see on the 4H chart, the USD/JPY pair is attempting to form a double bottom following a downward movement. This sets the technical preconditions for a potential upward reversal within the corridor between 146.93 and 150.21.
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