The EUR/USD pair remains under pressure from a strong US dollar. The greenback is holding firm ahead of the Federal Reserve’s policy decision later this week
Possible technical scenarios:
On the daily chart, EUR/USD remains in the middle of a medium-term downtrend while locally consolidating within the 1.1324–1.1494 range. The price still has room to move down toward the June lows at 1.1324. If it breaks out the 1.1324 level and consolidates below it, the next target for a medium-term decline will be 1.1191.
Fundamental drivers of volatility:
Although the market expects the Fed to hold interest rates in the 3.50%–3.75% range with roughly a 62% probability, investors will closely monitor the central bank’s statement and comments from Fed Chair Kevin Warsh for signals about future policy.
The main factor supporting the dollar remains expectations of a continued hawkish stance from the Fed. The market currently prices in roughly an 81% chance of a rate hike at the September meeting, which continues to underpin US Treasury yields and demand for the dollar.
For the euro, the key events in the second half of the week will be the preliminary July inflation readings from Germany and the Eurozone. These figures could significantly alter expectations regarding the European Central Bank's next moves.
The European currency is receiving additional support from statements by ECB officials. Governing Council member Peter Kazimir noted that at least one more rate hike may be required to curb persistent inflationary pressures. If the upcoming inflation data confirms sticky price pressures, expectations of further ECB tightening will strengthen, potentially limiting the euro's downside even against a strong dollar.
So given the aforementioned developments, in the short term, EUR/USD dynamics will be driven by a mix of Fed guidance, US rate expectations, and Eurozone inflation statistics, which will set the trajectory for future ECB policy.
Intraday technical picture:
As evidenced by what we see on the 4H chart, EUR/USD retains downside potential toward the support of the 1.1324–1.1494 range. If this support holds, the pair may pivot into a recovery within the sideways range.
The GBP/USD pair remains under pressure, with its next move set to be determined by the outcomes of this week's Fed and Bank of England meetings.
Possible technical scenarios:
Based on the current developments on the daily chart, GBP/USD continues to descend within a symmetrical triangle, maintaining room to drop toward 1.3215. Within the pattern, the pair has room to move toward the 1.3170 area. A downside exit from the pattern could extend the medium-term decline toward 1.2862
Fundamental drivers of volatility:
Both the Fed and the Bank of England are expected to hold interest rates unchanged this week, shifting market focus to forward guidance on future monetary policy steps.
The pound is drawing support from easing tensions surrounding the US-Iran conflict. Reduced geopolitical risks have dragged oil prices down, dampening inflation fears and weakening demand for the US dollar as a safe-haven asset. Furthermore, reports of ongoing diplomatic contacts between Washington and Tehran are boosting overall market sentiment.
In the meantime, the dollar's position remains quite strong. Despite falling oil prices, the market continues to price in a higher likelihood of a hawkish Fed. According to CME FedWatch, the probability of a rate hike at the current meeting is nearly 38%, while the chance of a September hike is around 81%. These expectations continue to support US bond yields and cap any upside recovery in GBP/USD.
An additional catalyst for the pound will be Thursday's Bank of England meeting. The central bank is widely expected to keep its benchmark rate at 3.75%, given that June inflation came in below forecasts. With the market placing roughly a 50% chance on a September rate hike, any dovish hints from the BoE could intensify pressure on the British currency.
Beyond monetary policy, investors are continuing to evaluate the economic direction of the UK's new government. The appointment of John Healey as Chancellor of the Exchequer and the retention of key Treasury officials are seen as signs of fiscal and economic policy continuity, offering moderate support to the pound and easing fears over fiscal risks.
Intraday technical picture:
As we can see on the 4H chart, GBP/USD still has room to move down toward the 1.3215 support level. Further direction depends on whether this level holds. A breakout would open the path toward the dotted level at 1.3139..
The USD/JPY pair is consolidating near multi-year highs above 163 yen per dollar, as market participants adopt a wait-and-see approach ahead of rate decisions from the US Federal Reserve and the Bank of Japan. Focus centers on comments from central bankers, which could reshape expectations for future interest rate paths.
Possible technical scenarios:
USD/JPY has consolidated above 163.47, with the next upside target sitting at 165.30. A breakout of this level could extend gains toward 168 yen per dollar. That being said, traders should keep in mind the threat of currency intervention by Japanese authorities above the 160 yen mark.
Fundamental drivers of volatility:
Fundamental advantages in the pair remain tilted in favor of the dollar. Despite easing geopolitical tensions in the Middle East, the market continues to price in a strong probability of further Fed tightening. According to CME FedWatch, the chance of a rate hold at the current meeting is around 62%, but investors still expect a rate hike in September, sustaining demand for the dollar.
No major policy shifts are expected from Japan. The Bank of Japan is likely to keep its key interest rate at 1%, though it may reiterate its intention to continue gradual monetary policy normalization. That being said, the substantial interest rate differential between the US and Japan continues to cap the yen's appreciation potential.
The Japanese currency received temporary support from lower energy prices following the decline in geopolitical risks, which slightly relieved pressure on Japan's economy. However, this effect may prove short-lived. Unless the Bank of Japan delivers hawkish signals regarding further rate hikes while the Fed maintains its hawkish stance, pressure on the yen will persist.
Over the coming days, USD/JPY dynamics will be driven by the outcomes of the Fed and BoJ meetings. Hawkish guidance from the US central bank could push the pair to fresh multi-year highs, whereas firmer rhetoric from the BoJ might trigger a corrective rally in the yen.
The risk of FX intervention by Japanese authorities to curb yen weakness also remains a critical factor.
Intraday technical picture:
The 4H chart shows that USD/JPY has left an ascending triangle and consolidated above 163.47. The technical pattern creates momentum for a potential price rise toward 165.30.
The USD/CAD pair is holding near two-week highs as market players stand on the sidelines ahead of the Fed's decision, while the Canadian dollar remains under pressure from falling oil prices.
Possible technical scenarios:
The daily chart demonstrates USD/CAD attempting to consolidate above 1.4108. If successful, the recovery could extend toward 1.4179.
Fundamental drivers of volatility:
The US central bank is expected to hold interest rates unchanged on Wednesday. However, the market's primary focus will be on the Fed's policy statement and remarks from Chair Kevin Warsh regarding the future monetary outlook.
The US dollar is supported by a high probability that the Fed will maintain its tight policy stance. Despite a temporary drop in geopolitical tensions between the US and Iran, markets are hesitant to revise interest rate expectations ahead of the Fed's announcement, maintaining steady demand for the greenback.
The Canadian dollar remains under pressure due to declining crude prices, which hit one-week lows following the easing of Middle East geopolitical risks. For the commodity-linked Loonie, this represents a major headwind as it weakens export revenue prospects.
Further pressure on the Canadian dollar stems from the Bank of Canada's dovish stance. Amid slowing inflation, the market expects no further policy tightening, while ongoing uncertainty over trade relations with the US continues to cloud Canada's economic outlook.
In the coming days, the Fed meeting outcome will serve as the primary catalyst for USD/CAD. If the US regulator confirms its commitment to restrictive monetary policy while oil prices remain depressed, conditions will favor further US dollar strengthening against the Canadian dollar.
Intraday technical picture:
Judging by the look of things on the 4H chart, USD/CAD has broken out above the 1.4013–1.4108 range and is consolidating above 1.4108, paving the way for further rise toward 1.4179.
Gold is trading with a modest drop at the start of the week, remaining under pressure from a firm US dollar and anticipation surrounding the Fed meeting outcome.
Possible technical scenarios:
Gold prices continue to hold above $4,000 per ounce, though the trading range is narrowing. Quotes remain within the 4002.27–4209.95 range. That said, a breakout of the 4002.27 level and consolidation below it would open a path down toward support at 3886.25.
Fundamental drivers of volatility:
Investor focus centers on the Fed's decision and further rate trajectory, which will dictate the direction of the precious metals market.
While the market expects no sudden policy shifts at this meeting, the likelihood of a rate hike has increased noticeably. CME FedWatch data shows a 62% chance of a rate hold, with a 38% probability of a hike at this meeting. Meanwhile, markets are pricing in roughly an 81% chance of a rate hike in September. These expectations are boosting US Treasury yields and the dollar, which traditionally weighs on gold.
The geopolitical situation in the Middle East remains an additional factor. Ongoing talks between the US and Iran have helped lower oil prices and ease inflationary risks. However, underlying tensions and the potential for renewed military action prevent markets from completely stripping out the geopolitical risk premium from safe-haven assets.
Aside from the Fed decision, investors will be keeping a close eye on Thursday's releases of Q2 US GDP data and the core Personal Consumption Expenditures (PCE) price index—the Fed's preferred inflation metric. These figures could significantly adjust expectations for future Fed policy. If the central bank fails to deliver clear signals of a September rate hike, gold could see a recovery impulse. Otherwise, sustained hawkish stance from the Fed alongside dollar strength will continue to cap upside potential for the precious metal.
Intraday technical picture:
The XAU/USD 4H chart suggests that a descending triangle is forming within the 4002.27–4209.95 range, with support at 3959.23 marked by the dotted line. While price often exits such patterns downward, continued trading inside the triangle remains currently possible.
If the US dollar reacts dramatically to the Fed decision, gold may fall. If that leads to a breakout of the 3959.23 level, the drop may extend toward the immediate target at 3886.25 and lower.
Brent crude prices remain under pressure following a sharp drop at the start of the week, as the market takes a positive view on prospects for a diplomatic resolution to the US-Iran conflict.
Possible technical scenarios:
As evidenced by the unfolding situation on the daily chart, Brent has turned lower within the 81.39–85.70 range, with some room left to move toward its lower boundary. If the 81.39 level is broken out to the downside and price consolidates below it, the next target for a decline will be 77.03.
Fundamental drivers of volatility:
Statements from US President Donald Trump regarding constructive negotiations with Tehran have relieved fears of widespread oil supply disruptions, even though both sides maintain threats of resuming military actions if negotiations fail.
At the same time, geopolitical risks remain elevated. Shipping through the Strait of Hormuz remains restricted, and activity in the Red Sea continues to decline. Additional threats stem from Yemeni Houthi attacks on Saudi Arabian energy infrastructure and claims of intent to disrupt transit through the Bab-el-Mandeb Strait. These factors limit the potential for deeper declines in oil prices.
An additional capping factor on market rallies is the resumption of export shipments through the Caspian Pipeline Consortium terminal on the Black Sea following a week-long shutdown, which partially increases global market supply.
Concerns over weak global demand, particularly from Asia, also weigh on the market. Nevertheless, preliminary estimates point to a drawdown in US crude and gasoline inventories over the past week, which could offer localized support to prices. In the near term, Brent dynamics will be governed by US-Iran negotiations, the situation around the Strait of Hormuz, and upcoming data on global demand and crude inventories.
Intraday technical picture:
As we can see on the 4H chart, Brent retains technical downside potential toward the support of the 81.39–85.70 range. Further direction will depend on whether 81.39 holds. If it does, a transition into a sideways move within the current range is likely.
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