The EUR/USD pair is consolidating near 1.0300 after rebounding from a two-year low.
Possible technical scenarios:
On the daily chart, EUR/USD has reversed upwards from the support zone of the range between 1.0220 and 1.0344 and has some room to move toward its resistance. If the pair consolidates above 1.0344, the upward movement may extend to the target of 1.0448, marked by the red dotted line.
Fundamental drivers of volatility:
This week, the focus is on the upcoming US Consumer Price Index (CPI) data for December, set to be released on Wednesday, which could shape market expectations regarding Federal Reserve rate policy. A moderate increase in core CPI by 0.2% month-over-month is anticipated. This could sustain pressure on the US dollar, which has already softened following weaker producer price index data.
The euro faces downward pressure from risks of a eurozone economic slowdown and ongoing market expectations of additional European Central Bank (ECB) rate cuts. In 2024, the ECB has already lowered rates by 100 basis points, and further cuts are anticipated.
However, policymaker Robert Holzmann highlighted the challenges of further monetary easing, citing core inflation hovering around 3% and the ongoing energy crisis as key factors influencing policy decisions.
Intraday technical picture:
As we can see on the 4H EUR/USD chart, the pair remains within a descending channel. The price is approaching the trend resistance at the intersection with 1.0344, where a downward reversal is likely if the current trend remains.
The GBP/USD pair has regained some lost ground as the pound shows signs of recovery following weaker-than-expected UK inflation data for December.
Possible technical scenarios:
Judging from the unfolding situation on the daily GBP/USD chart, the pair has turned upward, stopping just above the support level at 1.2068. The immediate recovery target is the resistance level at 1.2306.
Fundamental drivers of volatility:
Tuesday's data revealed that UK annual CPI growth slowed to 2.5%, falling short of the anticipated 2.7%, which has heightened expectations of a rate cut by the Bank of England. Core CPI also came in below forecasts, with service sector inflation dropping to 4.4%, bolstering arguments for a more accommodative monetary policy stance.
On Wednesday, the pair's movement could be influenced by US inflation data, which may provide fresh signals about the Federal Reserve’s next steps.
Meanwhile, a decline in UK bond yields to 5.38% from multi-year highs could lend support to the pound despite lingering risks from a slowing economy and potential trade tensions with the US. If the Bank of England proceeds with a rate cut at its February meeting, as markets anticipate, it could stimulate business activity and reduce pressure on the UK export sector.
Intraday technical picture:
According to the 4H GBP/USD chart, a series of higher lows within the range between 1.2068 and 1.2306 suggests a favorable setup for continued price growth.
The USD/JPY pair declined to 157.00 as the Japanese yen strengthened following hawkish comments from Bank of Japan Governor Kazuo Ueda.
Possible technical scenarios:
Based on developments we see on the daily USD/JPY chart, the pair is attempting to break out the support level at 157.10. Should the price consolidate below this level, the next target for further weakening would be 155.88 marked by the dotted line.
Fundamental drivers of volatility:
Bank of Japan Governor Kazuo Ueda signaled the possibility of an interest rate hike at the January 23-24 meeting, citing optimistic expectations for wage growth. This announcement increased the yen’s appeal, leading to its strengthening against major currencies, including the US dollar.
The dollar also faced downward pressure due to anticipation of US inflation data for December. Investors are forecasting a rise in overall CPI to 2.9% year-over-year, which could influence the Federal Reserve’s policy direction.
According to the CME FedWatch tool, the likelihood of a US rate cut by the end of 2025 remains low, with market participants expecting only one rate reduction this year. However, should inflation exceed expectations, the Fed may adopt a more hawkish stance, keeping rates elevated for a longer period.
Intraday technical picture:
The 4H USD/JPY chart shows that the pair is attempting to consolidate below 157.10. If the US dollar continues to decline following the release of inflation data, the pair could weaken further toward the support zone of the sideways range between two dotted lines 155.88 and 158.41.
The USD/CAD pair is under pressure due to the strengthening Canadian dollar, driven by reduced trade risks for Canada and hawkish expectations surrounding the Bank of Canada.
Possible technical scenarios:
The daily USD/CAD chart demonstrates that the pair is testing the support level at 1.4349. If this support is broken out and the US dollar continues to face downward pressure, the pair could fall further toward the next target at 1.4261.
Fundamental drivers of volatility:
Canada’s labor market data for December showed robust growth, with employment rising by 91,000 and unemployment decreasing to 6.7%. These figures have heightened expectations that the Bank of Canada will maintain its current policy without cutting rates, lending strength to the Canadian dollar.
Additionally, reports suggesting the Trump administration may gradually introduce import tariffs have eased concerns for Canadian exporters, further bolstering demand for the CAD. This calming of trade tensions has contributed to the CAD’s recent gains.
Conversely, the US dollar has weakened following disappointing Producer Price Index (PPI) data for December, which showed a modest 0.2% growth, falling short of expectations. Market attention is now focused on US consumer inflation (CPI) data, which could shape expectations for the Federal Reserve’s monetary policy direction.
Intraday technical picture:
According to the 4H USD/CAD chart, the pair is showing a systematic decline within the sideways range between 1.4297 and 1.4467 marked by red dotted lines. From its current position, the price has room to move lower toward the support at 1.4297.
Gold prices are strengthening for the second consecutive day, driven by a weakening US dollar and declining Treasury yields.
Possible technical scenarios:
From what we can observe on the daily chart, gold prices consolidating above 2659.99 pave the way for further strengthening toward the target level of 2708.36. If this level is overcome, XAU/USD quotes could continue rising to the next target at 2762.44.
Fundamental drivers of volatility:
Gold is benefiting from a weaker dollar, making it more attractive to investors holding other currencies.
Markets are focused on the upcoming US consumer price index (CPI) data, which is expected to show a 2.9% year-over-year increase. This report could shape expectations about Federal Reserve rate cuts, especially amid the uncertainty surrounding President Trump's inauguration. Should the CPI data fall below expectations, it could reinforce sentiment for rate cuts, bolstering demand for gold as a safe-haven asset.
Aside from that, concerns about potential tariffs that Trump may impose in his second administration are fueling demand for gold, given its traditional role as a hedge against inflation.
Intraday technical picture:
The 4H chart demonstrates that XAU/USD prices have reached the midpoint of the range between 2659.99 and 2708.36 and paused just below January’s high. If the price fails to overcome it, a pullback to the support at 2659.99 is likely.
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