The EUR/USD pair continues to consolidate within the sideways range established last week. A breakout could occur pending today's US data which may strengthen the US dollar.
Possible technical scenarios:
EUR/USD is currently hovering near the lower end of the sideways range between 1.0672 and 1.0749. A breakout below this support level, followed by consolidation, could lead to a decline targeting 1.0616.
Fundamental drivers of volatility:
The dollar index saw a 1.5% rise in the second quarter, reaching an eight-week high of 106.13 on Wednesday and registering a quarterly gain of 1.5%. This reflects heightened market expectations for reduced US interest rate cuts over the past six months. Today, the release of the US Personal Consumption Expenditures (PCE) index, the Fed's preferred inflation gauge, is pivotal. If annual growth slowed to the expected 2.6% in May, it could influence the trajectory of the US dollar and potentially pave the way for rate cuts later this year.
Intraday technical picture:
As evidenced by the 4H chart of the EUR/USD pair, a descending triangle has formed, marked by a slanting resistance coupled with support at 1.0672. This pattern suggests a potential downward movement in price. However, current conditions may see the price consolidating within the triangle pattern in the near term.
The GBP/USD pair declined towards the end of the week amid anticipation of the upcoming UK elections, which could influence the pound's movement.
Potential technical scenarios:
As we can see on the daily chart, GBP/USD retreated to the support level at 1.2608. From this point, a rebound towards resistance levels of 1.2656 and 1.2792 is possible in the short term. Conversely, a breakout of the 1.2608 support could lead to a decline targeting 1.2500.
Fundamental drivers of volatility:
The pound maintained relative stability throughout the quarter. Market players are focused on the upcoming UK general election and its potential impact on economic revitalization under a new government, particularly if Labor secures victory.
Aside from that, today's release of the US Personal Consumption Expenditures (PCE) index could impact the US dollar's performance. A slower-than-expected annual growth rate of 2.6% in May, as forecasted by economists, might influence expectations of future rate cuts.
Intraday technical analysis:
Judging by the unfolding situation we witness on the 4H GBP/USD chart, the pair is currently trading within the range between 1.2608 and 1.2656 range, with potential movements towards either boundary anticipated.
The Japanese yen continues to face downward pressure, declining to 161.28 per dollar on Friday, marking its lowest level since 1986.
Possible technical scenarios:
Looking at the daily chart of USD/JPY, the pair has consolidated above the 160.21 level, with the next resistance target set at 163.65.
Fundamental drivers of volatility:
The yen's depreciation is attributed to Japan's persistently low interest rates, prompting investors to sell the yen in favor of higher-yielding currencies. Despite rising Japanese bond yields and official warnings of potential currency intervention, the yen remains vulnerable.
Atsushi Mimura was appointed as Japan's new top currency diplomat on Friday, succeeding Masato Kanda. The Minister of Finance of Japan Shunichi Suzuki expressed significant concern over the yen's rapid and unilateral decline.
According to experts, Japanese authorities may intervene before the yen reaches the critical level of 164.50 per dollar.
Intraday technical picture:
According to the 4H chart of the USD/JPY pair, the price confirmed the level at 160.21 as support and rebounded from this level. This setup suggests a potential upward movement towards the 163.65 target or a retracement towards the 160.21 support level.
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