On Tuesday, the EUR/USD pair recovered some of the ground lost at the start of the week. That said, gains remain limited as investors remain cautious ahead of fresh signals on the Federal Reserve's next policy steps.
Possible technical scenarios:
On the daily chart, the EUR/USD pair remains stuck in the middle of a medium-term downtrend, trading below the psychological level of 1.1400. Within this trend, a localized upward correction toward 1.1494 is plausible. If the price fails to break above this level, it is likely to reverse downward toward the June lows of 1.1324.
Fundamental drivers of volatility:
The highlight of Tuesday's session will be the release of the US Consumer Price Index (CPI) for June. Recent comments from Fed officials suggest that stubbornly high inflation remains the primary concern for the central bank. Specifically, Fed Governor Christopher Waller noted that another strong inflation report could justify further monetary tightening in the coming months.
The market will also closely monitor Fed Chair Kevin Warsh's upcoming testimony before Congress on July 14 and 15. Although he previously indicated that he does not intend to provide pre-emptive rate guidance, investors will dissect his rhetoric to gauge inflation risks and the future path of monetary policy. Any hawkish hints could quickly restore support for the US dollar.
In the Eurozone, market participants continue to assess the European Central Bank's policy outlook. Despite a lack of clear signals from ECB policymakers, some analysts expect another 25-basis-point rate hike before the year ends. These expectations offer some support to the single currency, but they are currently not strong enough to offset the dollar's advantage, which is supported by expectations of a more aggressive Fed stance.
In view of this, short-term EUR/USD price action will be primarily driven by US macroeconomic data and Fed commentary. Should inflation beat expectations and Fed officials reiterate their readiness to raise rates, downward pressure on the euro is likely to intensify. Conversely, weaker-than-expected data could support an extension of the pair's upward correction.
Intraday technical picture:
As we can see on the 4H chart, EUR/USD is trading in the middle of the 1.1324–1.1494 range. From this technical position, the price could move toward either boundary.
The GBP/USD pair gave up some of last week's gains, remaining under pressure from a strong US dollar. Following the end of the recent upward momentum, market players have shifted to a wait-and-see approach as they evaluate the monetary policy outlook of major central banks.
Possible technical scenarios:
Judging by the look of things on the daily chart, GBP/USD continues to trade within a symmetrical triangle and is consolidating inside the pattern. The immediate upside target is the local dotted level at 1.3484. If the price exits the triangle to the upside, the next targets will be 1.3630 and 1.3752.
Fundamental drivers of volatility:
The primary support for the US currency stems from expectations that the Fed will maintain its restrictive policy. Persistent US inflation risks and the potential for further rate hikes continue to support demand for the greenback, limiting the upside for GBP/USD.
The US dollar's safe-haven appeal also remains a key supportive factor. Ongoing geopolitical tensions in the Middle East and the associated risks of rising inflation keep demand for the US dollar elevated and fuel expectations that the Fed will have to keep interest rates higher for longer.
On the UK side, there are currently not enough fresh fundamental drivers to boost the pound. While the market is waiting for more signals from the Bank of England, investors prefer to remain cautious, sending the pair into a consolidation phase.
The pound's recovery is also capped by uncertainty surrounding the domestic political landscape and the government’s fiscal priorities. Until investors gain greater clarity on future economic policy, demand for the British pound is likely to remain limited.
In the near term, market participants will focus heavily on upcoming US macroeconomic data and comments from Fed officials. These releases could adjust interest rate expectations and determine whether the US dollar retains its dominant position.
Intraday technical picture:
Given the current developments on the 4H chart, the pair is trading within a local uptrend and maintains technical potential to rise toward the immediate dotted level of 1.3484. A breakout and consolidation above this level would clear the way to 1.3630.
The USD/JPY pair remains close to multi-year highs despite a slight correction. The yen is supported by the risk of potential currency intervention from Japanese authorities, as well as investor caution ahead of the US inflation report and Fed Chair Kevin Warsh's upcoming testimony.
Possible technical scenarios:
The USD/JPY pair continues to trade around the 161.98 level, staying at a crossroads between a decline toward the 160.00 yen mark and a rally toward the 163.47 resistance level.
Fundamental drivers of volatility:
The fundamental backdrop remains highly supportive of the US dollar. The key driver continues to be the wide interest rate gap between the US and Japan. Although the Bank of Japan is gradually tightening policy, real interest rates in Japan remain significantly lower than those in the US, keeping USD-denominated assets highly attractive. Additionally, expectations of further Fed rate hikes amid sticky inflation and a resilient US economy continue to support the greenback.
Rising geopolitical tensions involving Iran and the Strait of Hormuz are also supporting the dollar. The threat of energy supply disruptions keeps inflation expectations high, increasing the likelihood that the Fed will maintain a hawkish stance.
Meanwhile, the Japanese yen remains under pressure due to weak domestic fundamentals, despite occasional support from intervention fears. Recent macroeconomic data from Japan failed to support expectations of more aggressive rate hikes by the Bank of Japan. The central bank's cautious approach continues to limit any sustained recovery for the national currency.
The major market catalysts will be the US Consumer Price Index (CPI) release and Fed Chair Kevin Warsh's first congressional testimony on July 14 and 15. These events could significantly alter interest rate expectations and dictate the next directional move for USD/JPY.
Intraday technical picture:
Given the unfolding scenario on the 4H chart, USD/JPY is trading in a narrowing range, forming a symmetrical triangle pattern around the 161.98 level. Consolidation within this pattern is likely to persist until a strong fundamental catalyst triggers volatility. A downside exit from the pattern could send the pair falling toward 158.93.
The USD/CAD pair fell as the Canadian dollar strengthened, supported by a sharp rally in oil prices. Rising tensions in the Middle East have boosted the appeal of commodity-linked currencies.
Possible technical scenarios:
On the daily chart, the USD/CAD pair dropped below the 1.4108 level. Consolidating below this point will open the door for a decline toward support at 1.4013.
Fundamental drivers of volatility:
The main driver behind the Canadian dollar's strength is the surge in oil prices following the US decision to reinstate a naval blockade on Iran and impose a transit fee for the Strait of Hormuz. The risk of supply disruptions has intensified global supply concerns, boosting the Canadian dollar as the largest oil supplier to the US.
That said, the downside for USD/CAD remains limited due to safe-haven demand for the US dollar. Heightened geopolitical risks and expectations of rising inflation driven by expensive oil increase the likelihood of further Fed tightening. The market is currently pricing in about a 50% chance of a September rate hike, which continues to support the US currency.
Investors are also focusing on the US inflation data and Fed Chair Kevin Warsh's upcoming testimony, which could reshape rate expectations. In addition, the Bank of Canada will hold its policy meeting on Wednesday. While the key rate is expected to remain steady at 2.25%, the central bank's commentary on inflation and the economic outlook could significantly impact the Canadian dollar.
Intraday technical picture:
The 4H chart shows that USD/CAD is steadily declining from the 1.4108 level, creating a technical setup for a continued drop toward the 1.4013 support level.
Gold is recovering after falling to a two-week low, though the overall fundamental backdrop remains mixed. The precious metal is supported by ongoing geopolitical tensions in the Middle East, while expectations of further Fed rate hikes continue to cap its upside potential.
Possible technical scenarios:
Gold prices continue to hold above the key $4,000 per ounce mark. The price has pulled back to the support level of the 4002.27–4209.95 range. If this support holds, XAU/USD is expected to stage a recovery within this sideways channel. Otherwise, a consolidation below 4002.27 would pave the way for a deeper decline toward support at 3886.25.
Fundamental drivers of volatility:
The key catalysts for the market remain the upcoming US Consumer Price Index (CPI) and Producer Price Index (PPI) releases, alongside Fed Chair Kevin Warsh's testimony. These events are highly likely to reshape investor expectations regarding the future course of monetary policy.
Increased expectations of Fed tightening continue to weigh on gold. Following comments from Fed officials, the probability of a September rate hike has risen to around 76%, as high inflation requires restrictive financial conditions to remain in place. Higher interest rates reduce the appeal of non-yielding gold.
On the other hand, the escalating conflict between the US and Iran supports safe-haven demand and drives oil prices higher, which fuels inflation concerns. Although gold is traditionally seen as an inflation hedge, this factor is currently being offset by expectations of a more restrictive Fed policy.
In the near term, gold's performance will be determined by the interaction of US macroeconomic data and geopolitical developments. Stronger inflation could boost rate hike expectations and pressure the metal, while deteriorating conditions in the Middle East could trigger renewed safe-haven flows.
Intraday technical picture:
As evidenced by the 4H chart, XAU/USD has bounced off the support boundary of the 4002.27–4209.95 range, creating preconditions for a price recovery and a continuation of the sideways trend.
Brent crude oil prices surged to four-week highs as the escalating conflict between the US and Iran reignited fears over the safety of supply through the Strait of Hormuz, which handles roughly 20% of global oil exports.
Possible technical scenarios:
On the daily chart, Brent crude has rallied over the last two days from the support level at 77.03 to the resistance level at 85.70. If buyers manage to push the price above 85.70, the upward move could extend toward targets at 89.48 and 95.18. Otherwise, the price may pull back toward support at 81.39.
Fundamental drivers of volatility:
The main catalyst behind the price jump is the reinstatement of the US naval blockade on Iran, alongside fresh military strikes and attacks on oil tankers in the Strait of Hormuz. With transit volumes through the strait falling to a two-month low, supply disruption fears are keeping a substantial geopolitical risk premium embedded in oil prices.
The risk of further escalation provides additional support. Iran could potentially walk away from its previously signed de-escalation memorandum, and the threat of Houthis expanding attacks on Saudi Arabian oil infrastructure could further strain global energy supplies.
That being said, oil's upward momentum is partially capped by demand-side fundamentals. China's crude imports fell by more than 40% in June, hitting their lowest level in nearly a decade due to weak domestic demand and lower refinery run rates.
In the short term, Brent's trajectory will depend on geopolitical developments in the Middle East. As long as supply risks through the Strait of Hormuz persist, the oil market is likely to maintain a significant geopolitical premium, despite signs of slowing global demand.
Intraday technical picture:
As suggested by the 4H chart, it remains unclear whether Brent can break and hold above the 85.70 resistance. For now, the price remains at a crossroads between a potential rally toward the dotted resistance at 89.48 and a pullback toward support at 81.39.
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