A preliminary agreement to temporarily raise the US state debt ceiling was reached before the long weekend. As a result of this news, risk appetite increased on Tuesday morning, sending the US dollar down to start the American trading day.
Possible technical scenarios:
Because of this, the EUR/USD pair, which had been putting the strength of support at 1.0713 to the test, has reversed upward. If this level holds, the price may be able to recover towards resistance at 1.0808. The next support for the pair is at 1.0592, which would be reached if the price breaks out 1.0713 and consolidates below it.
Fundamental drivers of volatility:
It's possible that German statistics may have a significant impact on how the single European currency behaves in the first half of the week.
The German labor market report for the month of May will be released on Wednesday at 7:55 am GMT. It is forecasted that the unemployment rate will continue at 5.6%, with the number of unemployed falling from 24,000 to 14,000.
The May inflation rate in Germany is set to be released at 12:00 pm GMT. The Consumer Price Index MoM is expected to increase from 0.4% to 0.6%,while the CPI YoY will climb from 7.2% to 7.3%.
In the second half of the week, market players' attention will be focused on the US labor market figures that will be released on Thursday and Friday, as these statistics may affect the dynamics of the US dollar in relation to the pair.
Intraday technical picture:
As can be seen on the 4H chart of the EUR/USD pair, the breakout of support at 1.0713 appears to have been false so far, which paves the way for an upside scenario with the next target located at 1.0808.
In the first half of the week, the GBP/USD pair has rebounded, as market mood has improved and the US dollar, which had been climbing through risk aversion, has fallen after an agreement to increase the US debt ceiling was reached over the weekend.
Possible technical scenarios:
The GBP/USD pair has climbed again over support at 1.2323 and is currently putting the strength of 1.2410 to the test. If the price manages to consolidate above it, it will be able to move higher, potentially reaching resistance at 1.2525 marked with dotted lines.
Fundamental drivers of volatility:
The first half of the week should be relatively quiet in terms of news volatility catalysts coming from the United Kingdom, while the US dollar in the pair will be sensitive to the pace at which Congress reaches the debt ceiling deal.
The volatility of the US dollar during the second half of the week will be determined by American employment reports, which will begin to arrive on Thursday.
Intraday technical picture:
There is still little evidence on the GBP/USD 4H chart to confirm that the breakout of 1.2410 was true. The price is likely to consolidate above this mark, and the recovery to the level of 1.2525 will continue, if the positive sentiment persists until the end of Tuesday's trading session.
Last week, the AUD/USD pair ended its four-month trend of sideways dynamics amid a stronger US dollar. A continued price gain is not necessarily dismissed, though, given that investors' risk appetite has risen this week.
Possible technical scenarios:
The AUD/USD quotes dropped last week below support at 0.6567 marked with green dotted lines, but pulled back toward this boundary on Tuesday. The price will either confirm this level as resistance by retreating from it downward, or will try to climb higher. In the first instance, the pair may continue falling within the medium-term range from 0.6567 to 0.6798, or may begin to recover.
Fundamental drivers of volatility:
This week's dynanics of the AUD/USD will be determined by the US dollar's volatility. Investors will be keeping an eye on Congress's debate over whether or not to raise the debt ceiling on Wednesday, and on Thursday and Friday, they'll get their first look at May's employment numbers, which always send the dollar reeling.
Intraday technical picture:
The technical references to look out for on the 4H chart of the AUD/USD pair are resistance at 0.6567 marked with green dotted lines and the possible support at the May 26 lows, a breakout below which would let the pair to resume its drop.
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