The EUR/USD pair continues to face pressure as the dollar strengthens in anticipation of the policies of Donald Trump, the winner of the US presidential election.
Possible technical scenarios:
As we can see on the daily chart, the EUR/USD pair is testing the dotted support level at 1.0614. If this level is broken out and the price consolidates below it, the next target for further decline will be at 1.0478.
Fundamental drivers of volatility:
The fiscal policy proposed by Trump has fueled inflation expectations and increased the likelihood of a Fed rate hike, making the dollar more attractive and exerting pressure on the euro.
According to CME Group, the probability of a Fed rate cut in December has dropped to 62% from 83%, reflecting confidence in the economic stability of the US and boosting demand for the dollar.
The euro is also facing pressure from weak economic data in the European Union: EU GDP for the third quarter is expected to show growth of only 0.4% quarter-over-quarter and 0.9% year-over-year. These low growth expectations, coupled with a potential 0.1% decline in EU GDP due to Trump’s proposed tariffs, continue to weaken the euro and reinforce the downtrend in the EUR/USD pair.
Intraday technical picture:
As evidenced by the 4H chart of EUR/USD, consolidation at the dotted support level of 1.0614 suggests caution among market participants ahead of the US inflation report. Given the surge in volatility from the news, movement in either direction from this level is possible. The direction will depend on whether the actual figures are better or worse than the forecast.
The GBP/USD pair is trading near a three-month low on Wednesday, with market participants awaiting the publication of US inflation data that could impact the dollar.
Possible technical scenarios:
According to the daily chart of GBP/USD, the decline in price has been halted by the dotted support level at 1.2723. If this level is broken out, the price may continue to weaken towards the 1.2656 level.
Fundamental drivers of volatility:
Market attention on Wednesday will be focused on the US inflation report. The October US Consumer Price Index (CPI) is expected to rise to 2.6%, while the core CPI is projected to remain steady at 3.3% year-over-year. If the actual figures align with these forecasts, it could boost confidence in the current Fed policy, thereby exerting additional pressure on the pound.
The probability of a Fed rate cut in December has dropped from 70% to 62%, according to CME FedWatch. Despite this, the Fed remains cautious: while inflation is expected to ease, any unexpected acceleration before year-end could prompt adjustments to monetary policy, strengthening the dollar and weighing on the GBP.
Intraday technical picture:
The 4H chart of the GBP/USD pair shows that a bearish flag formation is emerging, creating conditions for a breakout of the support at 1.2723 and a potential decline to the horizontal level at 1.2656, in line with the pattern's development.
The USD/JPY pair continues to rise, surpassing the 155.00 level, amid a weaker yen and a stronger dollar.
Possible technical scenarios:
On the daily chart, the USD/JPY price is testing the resistance level at 154.83. If this level is not a barrier, the price may continue to rise towards the next target at 157.10.
Fundamental drivers of volatility:
Despite Japan's PPI rising by 3.4% year-over-year, investors remain doubtful about the Bank of Japan's tightening policy, given the country's weak government and potential economic challenges. This diminishes the yen's appeal while supporting the dollar, which benefits from high US Treasury yields.
The strong US dollar is also bolstered by expectations of inflation due to Trump's expansionary fiscal policies, which are keeping the Fed from implementing aggressive monetary easing.
The likelihood of a Fed rate cut in December has dropped below 60%, signaling confidence in economic growth. However, concerns over potential intervention and upcoming US CPI data may affect the USD/JPY pair’s movement.
Intraday technical picture:
Judging by the unfolding situation on the 4H chart of USD/JPY, there is an attempt to consolidate the price above the 154.83 level. If this holds and the dollar continues to rise, the pair could target resistance at 157.10.
The USD/CAD pair has risen, driven by a stronger US dollar and a weaker Canadian dollar, reaching its lowest point since October 2022.
Possible technical scenarios:
The daily chart shows that the USD/CAD pair is approaching the resistance level of 1.3977. If this level is not broken out, the price may retrace to the support level at 1.3842. An alternative scenario, if the US dollar strengthens further, could push the pair to the next target at 1.4116.
Fundamental drivers of volatility:
The Canadian dollar has hit a two-year low due to the strengthening US dollar, largely driven by expectations of rising US inflation under Trump’s policies.
Several factors are weighing on the Canadian dollar, including the widening yield spread between US and Canadian bonds, which has reached its widest point since 1995. Additionally, the Trump administration’s focus on protectionist measures is increasing uncertainty. However, the US energy sector’s heavy reliance on Canadian crude oil imports helps stabilize the Canadian currency to some extent.
While Canadian 10-year bond yields have risen, they continue to lag behind US counterparts, keeping pressure on the Canadian dollar. As long as the yield gap remains, the Canadian dollar is likely to stay under pressure.
Intraday technical picture:
As we can observe on the 4H chart, USD/CAD is trading below the resistance of the uptrend, suggesting the possibility of a local pullback towards the support level at 1.3842.
Gold prices showed a slight recovery on Wednesday after three consecutive days of decline. However, strong pressure from the rising US dollar continues to limit any significant upside.
Possible technical scenarios:
According to the daily chart, XAU/USD reached support at 2600.12. A head and shoulders reversal pattern appears to be forming here, with the possibility of a second shoulder emerging in the range between 2600.12 and 2659.99, based on the 2600.12 level.
Fundamental drivers of volatility:
The key factor influencing gold remains expectations of higher inflation in the US, driven by Donald Trump’s proposed policies. This leads to rising Treasury yields and supports the US dollar at elevated levels.
Furthermore, investors are cautious ahead of the release of US consumer inflation data later today. The Consumer Price Index (CPI) is expected to rise by 0.2% in October, increasing uncertainty about the Federal Reserve’s next move, especially in light of potential inflation acceleration. As a result, gold remains under pressure, as it typically trades inversely to the strengthening dollar.
Intraday technical picture:
By the look of things on the 4H chart of XAU/USD, consolidation at the dotted support level keeps the pair at a crossroads. If the support holds, a price recovery to the resistance at 2659.99 could be possible.
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