The strengthening US dollar, fueled by expectations of prolonged high interest rates and increasing Treasury yields, is exerting downward pressure on the EUR/USD pair. Nonetheless, this week's data on the US labor market could temporarily counter this trend.
Possible technical scenarios:
As shown by the daily chart, the EUR/USD pair is slipping below the 1.0492 level, but it made an attempt to re-enter the range between 1.0492 and 1.0592 following weaker-than-expected ADP employment data in the United States. That being said, it remains uncertain whether the price will firmly establish itself above or below the 1.0492 level. Given the current technical conditions, there's potential for either a sideways recovery or a continued decline towards the target of 1.0352.
Fundamental drivers of volatility:
The primary driver of volatility for the US dollar this week will be the employment report, scheduled for release on Friday at 12:30 p.m. (GMT). Typically, this report tends to lead to increased market volatility, as the anticipated figures seldom align with the actual results.
Projections suggest that Nonfarm Payrolls, an indicator reflecting changes in employment within the non-agricultural sector, will be around 163 thousand, compared to the previous figure of 187 thousand. Aside from that, the average hourly wage is expected to show an acceleration from 0.2% to 0.3%. At the same time, the unemployment rate is anticipated to decline from 3.8% to 3.7%.
Intraday technical picture:
As evidenced by the 4H chart of the EUR/USD pair, we are witnessing a return of the price back into the sideways range between 1.0492 and 1.0592. If the pair remains within this range, we may anticipate a continued price recovery.
This week, the US dollar has been supported by rising government bond rates, putting downward pressure on the GBP/USD pair. On Wednesday, however, some of those losses were recovered as the US dollar fell on the heels of weaker-than-expected job data from ADP.
Possible technical scenarios:
Judging by the unfolding situation on the daily chart, GBP/USD is once again pulling back from the support of the downward trend, setting the stage for a potential corrective rebound. If the pair can establish a firm foothold above the horizontal level of 1.2146, it could potentially rally towards the target of 1.2323. However, failure to do so might lead the pair towards the support at 1.1934.
Fundamental drivers of volatility:
There are no significant UK news events expected for the remainder of the week, so the GBP/USD pair's movement will largely hinge on how the US dollar responds to the upcoming employment report.
The labor market figures are scheduled for release on Friday at 12:30 p.m. (GMT), with forecasts anticipating a drop in Nonfarm Payrolls from 187 thousand to 163 thousand. Additionally, we are expecting an increase in average hourly wages from 0.2% to 0.3%, along with a drop in the unemployment rate from 3.8% to 3.7%.
Intraday technical picture:
As demonstrated by the 4H chart, the ability of the GBP/USD pair to consolidate above the 1.2146-1.2323 range’s support that had been previously broken out remains uncertain. This leaves the price at a critical juncture, teetering between the prospects of a rebound within this sideways range and the potential for further decline.
On Tuesday, after temporarily trading at over 150 yen to the dollar, the USD/JPY pair plunged significantly. Market players speculate that the Japanese government intervened in the currency market, leading to this dramatic drop in prices, although the government has neither confirmed or denied the said intervention.
Possible technical scenarios:
As we can see on the daily chart, the USD/JPY pair has retraced to the middle of its range between 146.93 and 150.21. However, it remains positioned above the key support level at 148.34 marked by dotted lines. The fate of the pair, whether it rebounds or extends its decline, hinges on the strength of this boundary.
Fundamental drivers of volatility:
As concerns about potential interventions by the Bank of Japan persist, the yen remains under pressure, making the USD/JPY pair sensitive to the upcoming US labor market report anticipated on Friday at 12:30 p.m. (GMT). Projections suggest a decline in Nonfarm Payrolls from 187 thousand to 163 thousand. Additionally, we are expecting an uptick in average hourly wages from 0.2% to 0.3%, while the unemployment rate is anticipated to drop from 3.8% to 3.7%.
Intraday technical picture:
According to the 4H chart of the USD/JPY, there is still some room for the pair to drop to the support at 148.34 marked with dotted lines, and where the price ends up in relation to that level is likely to be dictated by how the US dollar responds to the employment data.
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