The EUR/USD pair has been on a downward trajectory since the start of the week, driven by a stronger dollar and anticipation of the ECB's rate decision on Thursday.
Possible technical scenarios:
As we can see on the daily chart of EUR/USD, the pair has been trading within the range between 1.0478 and 1.0614 since late November. This week, the price pulled back from the resistance at 1.0614 marked with dotted lines, and returned to the support of the sideways trend, where a potential upward reversal is possible. If the 1.0478 level fails to hold and the price consolidates below it, the next target for the pair’s decline will be the horizontal level at 1.0344.
Fundamental drivers of volatility:
The strengthening of the US dollar this week is supported by forecasts of consumer inflation rising to 2.7% for the general index and 3.3% for the core index. This outlook boosts Treasury bond yields, which in turn strengthens the dollar index (DXY). Markets are currently pricing in an 85.8% chance of a Fed rate cut in December, but inflation data may influence these expectations.
On Thursday at 1:15 p.m. GMT, the ECB is expected to announce a rate cut from 3.40% to 3.15%. The growing anticipation of a dovish central bank stance is putting additional pressure on the euro. Further guidance may come from the ECB's press conference, which could provide insight into the future policy direction.
Intraday technical picture:
Judging by the unfolding situation on the 4H chart of EUR/USD, the price has returned to the support of the sideways range between 1.0478 and 1.0614, and its next move will depend on which side of this horizontal level the price consolidates. The upcoming US inflation report and ECB decision will likely influence the pair’s positioning around this level.
The GBP/USD pair is trading within a narrow range ahead of the US November inflation data.
Possible technical scenarios:
On the daily chart, the GBP/USD pair is moving within a range between the dotted support at 1.2723 and resistance at 1.2792. A breakout of the 1.2723 level and a subsequent consolidation below it would pave the way for a decline toward the horizontal level at 1.2656. If this doesn't occur, sideways trading is likely to continue.
Fundamental drivers of volatility:
The primary catalyst for volatility on Wednesday will be the release of US consumer inflation data. Forecasts indicate an increase in the annual headline CPI to 2.7% and core CPI to 3.3%, which could heighten expectations for a 25-basis point rate cut by the Fed on December 18. However, the market’s response will depend on the deviation of the actual numbers from expectations.
Volatility in the pound may increase on Friday with the release of monthly GDP and industrial production data for October, offering a snapshot of the current economic situation. The Bank of England is expected to keep rates unchanged at 4.75% on December 19, despite signs of a weakening labor market.
Intraday technical picture:
According to the 4H chart of GBP/USD, we can see a reversal pattern forming, the inverse head and shoulders, with the neckline at 1.2723 (a dotted level). Although the pattern has been broken out, it is not yet fully played out, so the price still has the potential to rise toward the horizontal at 1.2846, though likely with some resistance.
USD/JPY continues to strengthen as the US dollar remains robust, while the reasons supporting the yen lack conviction.
Possible technical scenarios:
The daily chart of USD/JPY shows that the pair has consolidated above 151.71, leaving a small room to move to the next target at 153.09. A breakout and consolidation above 153.09 would pave the way for the next target at 154.83.
Fundamental drivers of volatility:
The Japanese yen remains under pressure as investors remain skeptical about the Bank of Japan’s willingness to raise rates in December, despite a rise in the PPI and accelerating core wages. These indicators suggest tightening monetary policy, but mixed statements from bank members add uncertainty.
Traders are also keeping a close eye on the US inflation data due on Wednesday. If the CPI confirms persistent inflationary pressures, this could influence market expectations regarding the pace of Fed rate cuts. Meanwhile, rising US Treasury yields continue to support the dollar, but geopolitical risks and cautious investor sentiment fuel demand for safe-haven assets, including the yen.
Intraday technical picture:
As we can observe on the 4H chart of USD/JPY, the pair retains some room to move within the range between 151.71 and 153.09. An exit from this range will likely depend on the market’s reaction to the upcoming US inflation data.
USD/CAD is trading near multi-year highs, with its potential decline uncertain due to conflicting factors influencing the price.
Possible technical scenarios:
On the daily chart, USD/CAD has broken out of the 1.4116 level and consolidated above it, leaving room for movement toward the resistance at 1.4261.
Fundamental drivers of volatility:
USD/CAD is rising due to a strong US dollar, while higher oil prices provide support for the Canadian dollar, exerting downward pressure on the pair. However, expectations of a rate cut by the Bank of Canada are limiting the CAD's strength.
The Bank of Canada may announce a 50-basis point rate cut on Wednesday, reducing the base rate to 3.25%. These expectations are keeping traders from aggressively buying CAD. Meanwhile, the US dollar is supported by market confidence in the slow pace of Fed rate cuts.
Traders are awaiting today’s US inflation data and the Bank of Canada’s decision, both of which are expected to be key catalysts for the direction of the USD/CAD pair.
Intraday technical picture:
On the 4H chart of USD/CAD, the price has been halted at the dotted resistance level of 1.4177, formed by the highs of November 26, within the sideways range between 1.4116 and 1.4261. If the price fails to consolidate above this level, it may retreat to the support at 1.4116.
Gold prices remain near a two-week high, buoyed by geopolitical tensions and expectations of a Fed rate cut next week.
Possible technical scenarios:
Based on the look of things on the daily chart of XAU/USD, the price has reached the resistance of the sideways range between 2659.99 and 2708.36. An upward exit from this range could open the path to the next resistance at 2762.44 and, potentially, to new historical highs.
Fundamental drivers of volatility:
This week, the key driver for the US dollar, which moves inversely to gold, will be the US consumer price index, expected to rise by 0.3% in November. This may reinforce market expectations for another Fed rate cut, which would be positive for gold.
Geopolitical tensions, including Israeli military actions in Syria and political instability in South Korea, continue to fuel demand for gold as a safe-haven asset. Additionally, central banks' active gold purchases and ongoing soft monetary policies are pushing gold toward its best year since 2010, when growth exceeded 30%.
Intraday technical picture:
On the 4H chart of XAU/USD, we observe a local reversal within the range between 2659.99 and 2708.36. This could lead to a return to support, with sideways dynamics likely to continue.
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