The EUR/USD pair is trading cautiously at the start of the week, as market players await significant US economic news that could impact the technical outlook.
Possible technical scenarios:
The EUR/USD pair has yet to establish a solid foothold above the resistance level of 1.0943. A retracement towards the support level at 1.0888 could occur. Should the pair manage to consolidate above 1.0943, the next resistance target would be at 1.1001.
Fundamental drivers of volatility:
This week, the primary driver of volatility for the pair will be the US dollar, with key economic data set to be released.
On Tuesday at 12:30 p.m. GMT, the Producer Price Index (PPI) for July will be published. It is anticipated that the core PPI will decrease from 0.4% to 0.2%, while the overall PPI is expected to remain steady at 0.2%.
On Wednesday, new inflation data will be released, which will influence the Fed's rate decisions. At 12:30 p.m. GMT, the CPI for July will be available. The core CPI is forecasted to increase by 0.1% to 0.2% month-over-month, while the year-over-year figure is projected to drop from 3.3% to 3.2%. The headline CPI is also expected to rise by 0.1% to 0.2% month-over-month, with the annual rate likely holding steady at 3.0%.
On Thursday, US retail sales data for July will be released at 12:30 p.m. GMT. Core retail sales are expected to decrease from 0.4% to 0.1%, while overall retail sales are anticipated to rise by 0.4% after remaining flat in the previous month.
Intraday technical picture:
As we can see on the 4H chart, the EUR/USD pair has declined from the 1.0943 level, opening the potential for a move towards the 1.0888 support. However, the dollar's response to the upcoming news could alter the direction and target levels.
This week, the GBP/USD pair received a boost following the release of UK labor market data.
Potential technical scenarios:
On the daily chart, the GBP/USD pair is currently putting the strength of the 1.2792 resistance level to the test. If it fails to break out this level, the price may decline towards the support at 1.2656. Alternatively, if the pair successfully breaks out 1.2792 and maintains consolidation above it, the next target could be 1.2846.
Fundamental drivers of volatility:
The pound was supported on Tuesday by the UK employment report, which revealed an unexpected drop in the unemployment rate to 4.2% in June from 4.4% in May, despite slower wage growth. This development slightly reduced investor expectations for a Bank of England rate cut in September. The Bank had previously indicated that it would closely monitor wage growth when considering a rate cut on August 1. That being said, current wage growth remains nearly twice as high as what the Bank considers consistent with a 2% inflation target over the medium term. Additional insight into the UK's economic situation will be provided later this week with inflation and retail sales reports.
Intraday technical analysis:
Judging by the unfolding situation on the 4H chart, it's still uncertain whether the GBP/USD pair will break out the 1.2792 level. The US dollar's response to the PPI report on Tuesday may influence the price movement around this key level.
The USD/JPY has inched higher as the Japanese yen's rally has paused.
Possible technical scenarios:
The daily chart shows that USD/JPY has risen above 146.37. If the level holds, the rally may continue with the immediate target set at 148.80.
Fundamental drivers of volatility:
The Japanese yen has slightly weakened after last week’s gains, as the focus shifts to key US economic data scheduled for release this week, which will impact the USD/JPY direction.
The July Producer Price Index (PPI) is set to be released at 12:30 p.m. GMT on Tuesday. The core PPI is forecasted to drop from 0.4% to 0.2%, while the overall PPI is expected to remain steady at 0.2%.
On Wednesday at 12:30 p.m. GMT, July inflation data will be published. The core CPI is predicted to rise by 0.1% to 0.2% month-over-month, with the year-over-year figure expected to decrease from 3.3% to 3.2%. The headline CPI is anticipated to increase by 0.1% to 0.2% month-over-month, with the year-over-year rate likely remaining unchanged at 3.0%.
On Thursday at 12:30 p.m. GMT, retail sales data will be released. Core CPI is expected to decline from 0.4% to 0.1%, while retail sales are forecasted to grow by 0.4% after remaining flat the previous month.
Intraday technical picture:
On the 4H chart, USD/JPY shows a steady increase within the range between 146.37 and 148.80, setting the stage for further gains if the weekly highs are surpassed.
The NZD/USD pair has risen due to improved risk sentiment and a temporary decline in the US dollar.
Possible technical scenarios:
According to the daily chart, NZD/USD is nearing the resistance level at 0.6048. A successful breakout and consolidation above this level could trigger further gains, targeting 0.6083. Alternatively, the price might pull back to the support level at 0.5994.
Fundamental drivers of volatility:
On Tuesday at 2:00 a.m. GMT, the Reserve Bank of New Zealand (RBNZ) will announce its interest rate decision, expected to hold steady at 5.50%. Market participants will closely scrutinize the Monetary Policy Report and the tone of the RBNZ's statement. Following this, at 3:00 a.m. GMT, the RBNZ will hold a press conference, which could impact the New Zealand dollar.
Meanwhile, the US dollar's movement will be influenced by this week’s inflation and retail sales data.
Intraday technical picture:
On the 4H chart, NZD/USD is approaching the 0.6048 level, where a potential reversal could occur. This outlook is supported by the formation of an ascending wedge within the upward movement.
Oil prices have risen for the fifth consecutive session, though the pace has slowed due to renewed concerns about demand.
Possible technical scenarios:
According to the daily chart, Brent crude has encountered resistance at 81.51. It could either pull back to the support level at 79.70 or continue climbing towards the 83.47 target.
Fundamental drivers of volatility:
The advance in oil prices moderated on Tuesday as attention shifted back to demand concerns. This shift followed OPEC’s revision of its 2024 oil demand growth forecast on Monday, which lowered expectations for China.
OPEC's updated forecast, marking the first cut since July 2023, reflects challenges for the broader OPEC+ group as it plans to boost output from October.
The reduction comes amid signs that Chinese demand is underperforming expectations, driven by a sharp drop in diesel consumption and difficulties in the real estate sector, which are slowing the growth of the world’s second-largest economy.
Intraday technical picture:
The 4H chart of Brent reveals that crude price consolidation is just below the 81.51 level. Further upward movement is possible, but it would require a breakout above this resistance level and sustained consolidation.
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