The EUR/USD pair has been cautiously rebounding since the start of the week, aided by a local dip in the American currency.
Possible technical scenarios:
The EUR/USD pair has risen within the sideways range between 1.0672 and 1.0749 since Monday. If the 1.0749 level is broken out and the pair consolidates above it, growth may continue to the next resistance level at 1.0801. If the 1.0749 level is not surpassed, the price may retreat to the support at 1.0672.
Fundamental drivers of volatility:
The euro, which was pressured last week by political factors, has recovered this week. Market players are still focused on the elections in France, but the EUR/USD pair has been supported by a decline in the US dollar.
The US dollar weakened due to lower-than-expected US retail sales in May. This raised the possibility that the Fed might cut rates earlier than December if the economy shows signs of slowing.
Intraday technical picture:
The four-hour EUR/USD chart does not provide additional information for more detailed analysis. We observe price consolidation below the 1.0749 level. A breakout and consolidation above this level could trigger a move toward the 1.0801 target. Otherwise, a downward reversal could bring the price back to the 1.0672 level.
The GBP/USD pair is recovering this week, prompted by the weakening US dollar following disappointing macroeconomic data.
Potential technical scenarios:
As we can observe on the daily chart, the GBP/USD pair rebounded upward from the support range between 1.2656 and 1.2792. From this level, the price has ample room to move toward the resistance at 1.2792.
Fundamental drivers of volatility:
The US dollar remains under pressure this week, especially after Tuesday's weaker-than-expected retail sales data.
Meanwhile, the pound strengthened as the UK's inflation report on Wednesday showed inflation returning to the 2% target in May for the first time in nearly three years, according to official data.
That being said, statements from the Bank of England suggest that merely achieving the inflation target is not enough to start lowering interest rates. Most analysts polled by Reuters believe the government will begin cutting rates from the current 16-year high of 5.25% in August. Financial markets, however, predict this is more likely to happen in September or October, with only a 10% chance of a decline this week. The results of the Bank of England meeting will be announced on Thursday.
Intraday technical analysis:
As evidenced by the 4H chart of the GBP/USD pair, we observe a systematic increase in price following an upward reversal from the 1.2656 level. The immediate targets for strengthening are the levels of 1.2760 and 1.2792.
The USD/JPY pair is consolidating this week with low volatility as the weakness of the US dollar offsets the weakness of the Japanese yen.
Possible technical scenarios:
Judging by the unfolding situation on the daily chart, the USD/JPY price has risen above 157.107. The next target for the pair is resistance at 160.21, but it must first overcome Friday's highs.
Fundamental drivers of volatility:
The fundamental background for the USD/JPY pair remains unchanged. The US dollar is stronger than the yen as the Fed delays rate cuts and the Bank of Japan's potential rate hikes will not significantly reduce the gap in borrowing costs.
Many economists expect the Bank of Japan to raise rates to 0.25% this year, though opinions differ on whether this will occur in July or later.
The weak yen complicates the Bank of Japan's policy: while it accelerates inflation by increasing the prices of imported goods, the resulting higher living costs weigh on consumption and question the strength of the Japanese economy.
Intraday technical picture:
According to the 4H chart, the USD/JPY pair shows a local resistance level at 157.98. Its breakout and consolidation above this level could pave the way for the price to reach the target of 160.21. If the level is not overcome, the pair may return to the support at 157.10.
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