The EUR/USD pair found moderate support on the back of a weaker US dollar, though investors remain cautious ahead of Thursday’s ECB meeting.
Possible technical scenarios:
Judging by the look of things on the daily chart, EUR/USD is edging higher within a medium-term downtrend. This local upward correction could extend toward the 1.1494 level. If the pair fails to overcome this mark, the price is likely to proceed to decline toward the June lows at 1.1324.
Fundamental drivers of volatility:
The outcome of the ECB meeting and management’s comments on the future path of monetary policy will be the main driver of the euro in the coming days. Investors will be weighing not only the rate decision itself but also the rhetoric surrounding inflation, economic health, and potential next steps. Any hints at maintaining a hawkish stance could bolster the European currency, whereas more cautious statements may amplify downside pressure on the euro.
The market is also paying close attention to interest rate prospects. The ECB’s deposit facility rate currently stands at 2.25%, but future decisions will depend entirely on incoming macroeconomic data. Should inflation prove persistent and economic activity continue to demonstrate stability, the likelihood of another rate hike will rise. Otherwise, the central bank may opt for a prolonged pause to assess the impact of measures already implemented.
The euro is also drawing support from mild US dollar weakness. If upcoming US macroeconomic statistics fall short of expectations and reduce the likelihood of further Fed tightening, pressure on the greenback will intensify, creating additional room for EUR/USD to recover. That said, sustained hawkish comments from Federal Reserve officials could limit the European currency's upside potential.
Toward the end of the week, investor focus will shift to preliminary PMI readings for Germany and the broader Eurozone. These figures serve as primary indicators of the region’s economic health, offering insight into manufacturing and service sector dynamics at the start of Q3. Stronger-than-expected data could reinforce expectations of economic resilience and support the euro, while weak prints would fuel doubts regarding the need for further ECB rate hikes.
Intraday technical picture:
As evidenced by the 4H chart, EUR/USD has consolidated above the support of the 1.1399–1.1494 range, leaving sufficient upside room to push toward its upper boundary.
The GBP/USD pair slowed its decline on Tuesday, gaining localized support from UK labor market data. That being said, investors remain cautious while awaiting fresh macroeconomic signals.
Possible technical scenarios:
As we can see on the daily chart, GBP/USD continues to trade inside a symmetrical triangle. An upside exit from the pattern, and following the reversal, the decline could resume toward the 1.3215 level, which still leaves sufficient room for further downside movement.
Fundamental drivers of volatility:
UK labor market statistics came in better than expected on Tuesday, providing a boost to the pound. Employment figures grew by 147K compared to 100K previously, while the unemployment rate held steady at 4.9%. Average earnings growth excluding bonuses remained at 3.4% YoY, matching forecasts, while the reading including bonuses slowed to 4.3% from 4.4% previously against a 4.5% projection. This mitigates concerns over rising inflationary pressures and reduces the urgency for further aggressive rate hikes by the Bank of England.
Additional support for the pound stemmed from a reduction in political uncertainty following John Healey’s appointment as Chancellor of the Exchequer. Market participants are now shifting their focus from political risks to the new government’s prospective fiscal policies. UK 10-year gilt yields fell to 5.025%, and public sector net borrowing narrowed to £16 billion in June, providing a positive signal for financial markets and the British currency.
The key event now will be Wednesday’s release of the UK Consumer Price Index for June. Headline inflation is projected to slow to 2.7% YoY, with core CPI easing to 2.5% YoY. These data points could significantly shape expectations surrounding the Bank of England’s policy path and dictate the next directional move for GBP/USD.
Intraday technical picture:
Given the current situation on the 4H chart, the local uptrend remains intact. If it holds, a rise toward the 1.3630 resistance level is plausible. A trend reversal could mark the beginning of a medium-term decline toward 1.3215.
The USD/JPY pair maintains its bullish bias, trading near multi-year highs. The dollar continues to draw primary support from the substantial interest rate differential between the US and Japan, with the Bank of Japan maintaining a significantly looser monetary policy stance relative to the Federal Reserve.
Possible technical scenarios:
USD/JPY is trading close to its July high of 162.84. A breakout and consolidation above it would pave the way toward resistance at 163.47 and higher. Should the pair fail to clear the July highs, the price could pull back toward the support at 160.41 marked by the dotted line.
Fundamental drivers of volatility:
Further upside momentum is somewhat capped by softer demand for the US dollar amid diplomatic signals hinting at a potential de-escalation in the US-Iran conflict.
Reports of a proposed 10-day ceasefire and ongoing negotiations have tempered safe-haven demand, though geopolitical uncertainty across the region remains elevated.
Investors are also monitoring domestic developments in Japan. Prime Minister Sanae Takaichi reaffirmed the government’s commitment to fiscal sustainability and financial market confidence, while outlining goals to accelerate economic growth. That being said, these statements have yet to alter expectations regarding the Bank of Japan, which markets anticipate will raise rates at an extremely gradual pace.
The key catalyst for the yen this week will be the release of Japan’s June inflation figures. Core CPI, excluding fresh food, is expected to accelerate to 1.6% YoY from 1.4% in the prior month. Stronger-than-expected inflation could strengthen expectations of monetary policy normalization by the BoJ, lending support to the yen. Conversely, weak data would confirm the central bank’s dovish trajectory, allowing the dollar to hold its advantage.
Intraday technical picture:
As evidenced by the 4H chart, USD/JPY’s narrowing volatility range has formed an ascending triangle with its upper boundary at the July highs (162.84). Such chart patterns typically resolve with an upside breakout. In that event, the pair’s rally could extend beyond the 163.47 mark.
The USD/CAD pair is consolidating after its early-week gains, though the underlying fundamental picture remains mixed. Downside pressure on the US dollar stems from diminishing safe-haven demand amid hopes for a diplomatic resolution to the US-Iran conflict. Statements from Washington indicating a readiness for talks have contributed to mild greenback weakness.
Possible technical scenarios:
As we can see on the daily chart, USD/CAD has bounced off the 1.4013 level and retains technical potential for a recovery toward resistance at 1.4108.
Fundamental drivers of volatility:
The Canadian dollar is also drawing support from firming crude oil prices. Despite diplomatic signals, the situation surrounding the Strait of Hormuz remains tense: maritime traffic continues to face restrictions, and threats of a naval blockade against Saudi Arabia by Yemeni Houthi forces maintain risks of global oil supply disruptions. As a currency tied to a major energy exporter, this remains a bullish factor for the Loonie.
In the meantime, CAD gains are limited by diverging monetary policy expectations between the two central banks. Markets continue to price in the possibility of a Fed rate hike before year-end due to inflation risks linked to elevated energy prices. Conversely, soft Canadian inflation metrics have reinforced expectations that the Bank of Canada will hold its benchmark rate unchanged through the end of 2026.
New US trade tariffs on Canadian goods represent an additional risk factor for the Loonie, as they threaten to weigh on exports and broader economic activity.
Subsequent USD/CAD dynamics will largely be driven by headlines surrounding the Middle East conflict, Fed policy expectations, and crude oil price dynamics.
Intraday technical picture:
The 4H chart shows that USD/CAD is trading in the middle of its 1.4013–1.4108 sideways range, from which it could make a localized move toward either boundary.
Gold is rebounding from the psychologically relevant $4 000 per ounce mark. The precious metal is finding support from expectations of easing geopolitical tension in the Middle East, which cools fears of accelerating inflation and overly aggressive Fed tightening.
Possible technical scenarios:
Gold prices have held firm above $4 000 per ounce. Quotes pulled back upward from the support boundary of the 4002.27–4209.95 range, giving XAU/USD technical room to advance toward resistance at 4209.95. That said, if 4002.27 is broken out on fundamental news and price consolidates below it, the path will open for a slide toward support at 3886.25.
Fundamental drivers of volatility:
Market players remain focused on diplomatic efforts to settle the US-Iran conflict. Tehran has received a proposal for a 10-day ceasefire, which could serve as an intermediate step toward a broader, long-term agreement. Simultaneously, the market is monitoring threats from Yemeni Houthis regarding a maritime blockade of Saudi Arabia, keeping baseline geopolitical risks intact.
The easing of immediate tensions led to a pullback in crude oil prices following their rally to a one-month high. This has slightly tempered inflation expectations, though they have not disappeared entirely. Earlier spikes in oil prices had heightened concerns over persistent price pressures and the need for further US monetary tightening.
Despite the local recovery in gold, the metal's upside remains capped by expectations of a hawkish Fed policy stance. While markets fully expect rates to remain unchanged at the upcoming meeting, the CME FedWatch tool points to roughly a 64% probability of a rate hike in September. Sustained high interest rates enhance the appeal of yield-bearing assets, traditionally limiting upside momentum for gold.
Intraday technical picture:
The 4H XAU/USD chart suggests that a bounce off the lower boundary of the 4002.27–4209.95 range’s support, creating technical preconditions for a price recovery and a continuation of sideways dynamics.
Brent crude prices are pulling back following recent gains as signs of a potential de-escalation in the US-Iran conflict emerge.
Possible technical scenarios:
On the daily chart, Brent has consolidated above the 85.70 level, setting the stage for a push toward the 95.18 target, provided price can overcome the intermediate resistance at 89.48 marked by the dotted line.
Fundamental drivers of volatility:
Crude prices face downside pressure following reports that mediators in the US-Iran conflict proposed a 10-day ceasefire, which could serve as a first step toward resuming the implementation of the June memorandum of understanding. However, traders remain cautious, as the negotiation process is fragile and significant divides persist between Washington and Tehran.
Despite diplomatic efforts, geopolitical risks remain high. Following a series of retaliatory strikes, the US has continued military operations against Iran, while the Islamic Revolutionary Guard Corps targeted US installations in the region. Further risk stems from Yemeni Houthi threats to impose a naval blockade on Saudi Arabia, which could endanger oil shipments not only through the Strait of Hormuz but also directly from one of the world’s top crude exporters.
The situation in the Strait of Hormuz remains equally tense. According to the United Kingdom Maritime Trade Operations (UKMTO), a tanker was struck by an unknown projectile, and vessel transits through the strait continue to decline due to heightened shipping risks. Any disruption along this vital transit route could sharply restrict global supply.
Additional support for the oil market may come from upcoming US crude inventory data. Preliminary estimates suggest commercial crude and gasoline stockpiles fell last week, signaling sustained demand.
Subsequent price action in Brent will largely depend on how US-Iran negotiations unfold: diplomatic progress could deepen the corrective pullback, whereas a fresh escalation or supply disruptions would quickly return quotes to an upward trajectory.
Intraday technical picture:
Given the unfolding scenario on the 4H chart, Brent is approaching local resistance at 89.48 marked with a dotted line. Clearing this level will allow quotes to continue their advance toward the next target at 95.18.
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