The EUR/USD pair is trading under the influence of a sharp weakening of the US dollar, caused by an unexpectedly weak report on non-farm payrolls.
Possible technical scenarios:
As evidenced by the daily chart of the EUR/USD pair, we see a reversal of the downward trend with the sloping neckline of the head and shoulders pattern having been broken. After the rollback is complete, a further decline to the level of 1.1191 is possible.
Fundamental drivers of volatility:
A significant drop in new jobs in July and a major revision of data for prior months have heightened concerns about a potential recession in the U.S. economy. This has sharply shifted market expectations: the probability of a Fed rate cut in September has risen to 80%. Political instability is further pressuring the dollar: the resignation of Fed member Adriana Kugler and President Trump's harsh remarks are undermining confidence in the independence of monetary policy.
From the eurozone perspective, the impact on the euro remains muted due to deteriorating economic indicators. The Sentix investor confidence index dropped to -3.7, against expectations of growth, signaling ongoing weakness in the region's economy. Nevertheless, the euro managed to stay above 1.1550, thanks to momentum from Friday's rebound and the dollar's partial loss of its safe-haven status amid worsening U.S. macroeconomic prospects.
The current EUR/USD dynamics are shaped by a mismatch in fundamental signals: the weakening dollar, driven by weak data and political instability in the U.S., is temporarily outweighing the eurozone's weakness. In the short term, the pair will remain sensitive to comments from Fed officials and U.S. economic data, which will be crucial in determining its future movement.
Intraday technical picture:
Judging by the unfolding situation on the 4H chart of EUR/USD, the price's retreat downward from the dotted level of 1.1589 creates technical prerequisites for a further decline to the lows of August 1 (1.1391). If those lows are updated, the next target for the pair will be the support at 1.1191.
The GBP/USD pair is consolidating in anticipation of key monetary policy decisions on both sides of the Atlantic. The balance between the weakness of the British economy and expectations of a soft Fed policy is keeping the pound in a narrow range.
Possible technical scenarios:
Given current developments on the daily chart of GBP/USD, the pair has implemented a head and shoulders reversal pattern, falling to the support level of 1.3147. An upward pullback to the dotted resistance at 1.3378 is now possible. After this, the price may continue to decline to the targets of 1.3147 and 1.2862.
Fundamental drivers of volatility:
The pound sterling is trading steadily ahead of the Bank of England's meeting on Thursday, with markets pricing in a 25-basis-point interest rate cut, which would be the fifth cut since August 2024. The Bank of England has committed to a "gradual and cautious" easing policy, and investors are now focused on Andrew Bailey’s rhetoric to assess the likelihood of further rate cuts in 2025. Expectations of policy easing are fueled by signs of a weakening labor market and persistent inflationary pressures, leading to fears of stagflation in the UK economy.
On the other hand, the US dollar is under pressure after weak US employment data and a sharp revision to previous months' figures. This has significantly increased expectations for a Fed rate cut in September, with markets pricing it in at over 90%.
Despite the dollar's attempts to recover earlier in the week, uncertainty around its outlook remains, especially with upcoming US business activity data that could affect perceptions of the country's economic resilience. The future movement of GBP/USD will largely be determined by the Bank of England’s tone and the market’s reaction to US business activity and inflation data.
Intraday technical picture:
On the 4H chart, the technical picture aligns with the forecast from the daily time frame. Locally, the quotes have some room to move to the dotted resistance of 1.3378. After that, the downward trend is likely to continue.
The USD/JPY pair is balancing between domestic drivers of monetary policy tightening in Japan and expectations of easing in the US.
Possible technical scenarios:
The daily chart shows that the USD/JPY pair is trading in the middle of the range between 145.91 and 148.63, where it can move to either boundary. If the dollar weakens further and the yen strengthens, a breakout of the 145.91 level will open the way for quotes to move towards support at 143.45.
Fundamental drivers of volatility:
The USD/JPY pair is holding above the 147.00 level, despite domestic support for the Japanese yen. The support is mainly driven by the "hawkish" minutes from the June meeting of the Bank of Japan (BoJ) and strong data from Japan's services sector.
The increase in the PMI index to 53.6 in July, along with signals of a potential BoJ rate hike by the end of the year, creates a solid foundation for the yen’s gradual strengthening. However, political instability in Japan following the ruling party's defeat in elections and cautious comments from the Governor of the Bank of Japan, Kazuo Ueda, are preventing this scenario from fully developing.
On the other hand, the US dollar remains under pressure due to weak labor market data and growing expectations of a Fed rate cut as early as September. The probability of such a cut, according to CME FedWatch, has exceeded 80%. Political instability surrounding the independence of the Fed, after the resignation of Fed member Adriana Kugler and Trump's interventions, adds further uncertainty to US monetary policy.
This limits the potential for dollar growth, despite a moderate recovery of the DXY index and positive dynamics in the stock markets, reducing demand for safe-haven assets like the yen.
Intraday technical picture:
As we can see on the 4H chart, the pair is trading in the middle of the sideways range between 145.91 and 148.63, with potential to move towards either boundary.
The USD/CAD pair is recovering for the second day, balancing between a weakening Canadian dollar and limited growth potential for the US dollar.
Possible technical scenarios:
On the daily chart, the USD/CAD pair is recovering within the range between 1.3744 and 1.3861. Given the development of the triple bottom reversal pattern, there is a possibility of a breakout above the 1.3861 level and consolidation above it, which will open the way for quotes to reach the next target at 1.4013.
Fundamental drivers of volatility:
The main factor putting pressure on the Canadian dollar is the decline in oil prices, Canada's key export commodity. Oil prices weakened following OPEC+ decisions to increase production, raising concerns about oversupply. This limits demand for the Canadian dollar, despite a relative calm in the commodity markets. Meanwhile, the US dollar remains moderately stable, but its growth potential is restrained by increasing expectations of a Fed rate cut in September. The probability of a rate cut, according to CME FedWatch, exceeds 91% after weak US labor market data was released.
An additional source of uncertainty is the resignation of Fed Board member Adriana Kugler and the potential for increased political influence on the Federal Reserve by President Donald Trump. This has undermined confidence in the Fed's independence and has contributed to the expectation of a more accommodative monetary policy.
In the short term, market participants will be focused on ISM data regarding the US services sector and the dynamics of oil prices. As long as uncertainty persists, the pair is likely to remain in consolidation mode, with a bias towards support for the USD.
Intraday technical picture:
According to the 4H chart, the price reversal upwards from the support at 1.3744 creates the preconditions for a recovery towards the nearest target at 1.3861.
Oil prices remain under pressure due to the OPEC+ decision to expand production, raising concerns about supply growth.
Possible technical scenarios:
On the daily chart, Brent quotes are approaching the support range between 66.51 and 70.62. A breakout of the 66.51 level could lead to further declines, with the next target at 65.02.
Fundamental drivers of volatility:
Oil prices fell to weekly lows following the OPEC+ decision to increase oil production by 547 thousand barrels per day starting in September. This has heightened fears of an oversupply in the market, particularly amid weak demand for fuel in the US, the world's largest oil-consuming nation.
OPEC+'s decision to ramp up production is part of an accelerated review of its earlier reduction policies, gradually lifting restrictions of about 2.5 million barrels per day (approximately 2.4% of global demand). Meanwhile, the US reported record domestic production levels in May and weakening gasoline demand — the worst figures since 2020.
This combination of factors puts pressure on oil prices and raises expectations of further supply growth, especially with the possibility of an additional 1.65 million barrels per day being lifted at the next OPEC+ meeting on September 7.
Political factors also contribute to market instability: US President Donald Trump's threat to impose 100% tariffs on countries buying Russian oil, including India, could remove up to 1.7 million barrels per day from the market .
Intraday technical picture:
On the 4H Brent chart, there is enough downward momentum towards the 66.51 support level. Given the unfavorable fundamental backdrop, further decline to 65.02 is possible. Otherwise, we may see a recovery within the range of 66.51 - 70.62.
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