EUR/USD continues to decline amid a strengthening US dollar and a dovish stance by the ECB.
Possible technical scenarios:
The EUR/USD pair has confidently dropped below the 1.0801 level on the daily chart, which opens the way to the nearest support at 1.0749, and if it is broken out, to the 1.0672 level.
Fundamental drivers of volatility:
The main factor putting pressure on the euro is the growing US dollar index, which is approaching the August maximum. The strengthening of the American currency is also associated with political uncertainty in the US before the elections and expectations that the easing of the Fed's monetary policy will be slower than expected.
Expectations of Donald Trump's victory in the elections also strengthen the dollar, as it may lead to higher tariffs and lower taxes, which will force the Fed to return to a tight policy. That being said, markets expect the Fed to cut rates by 50 basis points before the end of the year, which implies two 25 basis point cuts in November and December.
On the euro side, the situation is complicated by the deterioration of economic indicators in the eurozone, including a rapid decline in inflation. This is increasing expectations for further rate cuts by the ECB. Recent comments by ECB President Christine Lagarde confirm the commitment to reduce inflation to the 2% target by 2025.
Intraday technical picture:
As evidenced by the 4H chart of EUR/USD, we see the pair reaching the middle of the range between 1.0749 and 1.0801, which allows it to weaken further. However, locally an upward correction is possible within this sideways range
The GBP/USD pair remains under pressure and is trading below the 1.3000 level amid a strengthening US dollar.
Possible technical scenarios:
On the daily chart, GBP/USD shows attempts to solidify below the 1.2989 level, which could pave the way to the next major support at 1.2846. Alternatively, the pair might revert to a narrow trading range between 1.2989 and 1.3044.
Fundamental drivers of volatility:
On Wednesday, the pound managed to slightly recover some of its losses against the US dollar, buoyed by comments from Bank of England Monetary Policy Committee member Megan Green. She advocated for continued inflation control through interest rates. Despite a recent dip in UK inflation, Green attributed it to temporary factors, suggesting it won’t influence her vote in November.
Meanwhile, the US dollar is gaining strength due to political uncertainties in the US and expectations of a gradual shift in Fed policy. The dollar’s appeal as a safe-haven asset has also risen, given the political uncertainties leading up to the US presidential election on November 5. A potential Trump victory could lead to higher tariffs, adding to economic instability and driving demand for the dollar.
Intraday technical picture:
As we can see on the 4H GBP/USD chart, if the pair stabilizes below 1.2989, it could head towards the next support at 1.2846, assuming current fundamental factors continue to influence the pair.
The USD/JPY pair reached its highest levels since late July amid growing interest in the dollar and a lack of support factors for the yen.
Possible technical scenarios:
The daily chart shows that USD/JPY is nearing a strong resistance level at 153.09. A reversal from this point could see the pair drop back to the psychological support of 150 yen per dollar. However, if it consolidates above 153.09, the next growth target would be 154.83.
Fundamental drivers of volatility:
The Japanese yen remained under pressure on Wednesday, with uncertainty surrounding the timing and extent of future interest rate hikes by the Bank of Japan.
Meanwhile, the US dollar surged to a new high since early August, as expectations build that the Federal Reserve will ease its policy at a slower pace. Aside from that, concerns over a widening budget deficit after the November 5 US presidential election are boosting the dollar’s appeal as a safe-haven asset. Rising US Treasury yields continue to weigh on the yen, as investors shift toward higher-yielding assets, making the JPY less attractive.
Market participants are also closely watching BOJ Governor Kazuo Ueda’s upcoming speech at an IMF event, while Tokyo inflation data, set for release on Friday, could significantly impact the yen ahead of Japan’s October 27 election and the BOJ meeting on October 31.
Intraday technical picture:
Judging by the unfolding situation on the 4H USD/JPY chart, trading within the range of 151.71 - 153.09 could result in a breakout upwards, potentially reaching the next target at 154.83 if the US dollar’s strength persists.
USD/CAD continues to rally as the Canadian dollar weakens ahead of a fourth consecutive Bank of Canada monetary easing, while the US dollar remains strong.
Possible technical scenarios:
According to the daily chart, USD/CAD is consolidating just below the resistance at 1.3842. The upcoming Bank of Canada rate decision could trigger heightened volatility, potentially leading to a breakout above this level if the central bank maintains a dovish tone. Strong resistance remains at 1.3842, while the nearest support level is at 1.3753.
Fundamental drivers of volatility:
The Canadian dollar is under pressure as the market anticipates a rate cut by the Bank of Canada on Wednesday. The expected 50 basis point reduction to 3.75% is driven by a slowdown in economic activity and easing inflation pressures.
Canada’s target, paving the way for more aggressive rate cuts. Further easing of monetary policy could help support the economy and alleviate pressure on the labor market, which is already showing signs of slowing. The Governor of the Bank of Canada, Tiff Macklem, has stated that additional rate reductions make sense as inflation trends back toward the 2% target. The CAD's reaction to the BoC’s decision will likely hinge on the central bank’s commentary during the press conference.
Intraday technical picture:
As shown by the 4H USD/CAD chart, there is a local reversal downward from the resistance at 1.3842, which may signal a decline towards 1.3753. However, the Canadian dollar's reaction to the central bank's decision could shift technical targets, leading to increased volatility.
Oil prices continue to decline despite geopolitical tensions.
Possible technical scenarios:
On the daily chart, we see that Brent failed to overcome the resistance level of 75.18, which may return it to the support level of 70.85. If it does manage to consolidate above the level of 75.18, the next target for growth will be the resistance of 77.25.
Fundamental drivers of volatility:
Oil prices continue to decline, especially after industry data showed an increase in U.S. crude inventories on Tuesday. The losses were also caused by concerns about a decrease in demand from China and some easing of concerns about supply disruptions.
That said, the increase in U.S. inventories could not completely offset concerns about possible risks to oil supplies due to the escalation in the Middle East. The market continues to closely monitor events in the region, especially in anticipation of Israel's response to missile attacks from Iran.
On top of that, US Secretary of State Antony Blinken's visit to Israel, where he called for increased humanitarian aid to Gaza, also did not help stabilize prices. The conflict could drag on, adding uncertainty and anxiety about future oil supplies.
Intraday technical picture:
As we see on the 4H Brent chart, the support level of 75.18 is being traded, creating local uncertainty in the price direction. Against this background, we should not rule out either attempts to consolidate below it or a return to the lows of October 18.
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