The EUR/USD pair gained support on Wednesday due to robust economic growth data, while the US dollar dipped slightly.
Possible technical scenarios:
EUR/USD is holding steady above 1.0801, though it has yet to consolidate above recent highs. If this happens, the next upward target could be the resistance level at 1.0888.
Fundamental drivers of volatility:
The euro strengthened on Wednesday following eurozone GDP data for Q3, which indicated a 0.4% expansion, outperforming the anticipated 0.2% growth. This boost came largely from an unexpected recovery in Germany, the eurozone’s largest economy, where GDP rose by 0.2% after contracting in the prior quarter.
In light of these developments, the likelihood of a 50 basis points rate cut from the ECB in December dropped from 45% to 22%, giving additional support to the euro.
The primary event for the week remains the release of the US Labor Market Report for October, expected on Friday, which traditionally brings heightened volatility. Projections suggest a 0.3% rise in average hourly earnings, a slight decrease from the previous 0.4% gain. The unemployment rate is expected to stay steady at 4.1%. Nonfarm Payrolls are forecasted to show an increase of 111,000 jobs, considerably below the previous 254,000 increase.
Intraday technical picture:
On EUR/USD’s 4H chart, a reversal pattern known as the “double bottom” has emerged within the downtrend, with its neckline at 1.0838. A breakout and consolidation above this level could allow prices to advance toward the next target of 1.0888.
The GBP/USD pair remains under pressure this week ahead of economic data and the UK autumn budget.
Possible technical scenarios:
As evidenced by the daily chart, the GBP/USD pair is currently testing the resistance level of 1.2989. As long as the price does not consolidate above the dotted horizontal line at 1.3044, it has the potential to continue weakening towards the support level of 1.2846 in the medium term.
Fundamental drivers of volatility:
For the dollar in this pair, the significant news this week will be the US GDP reports and employment data, which are scheduled for release on Friday. Projections indicate that the unemployment rate will stay at 4.1%, and the number of individuals employed in the non-farm sector (Nonfarm Payrolls) will rise by 111 thousand, which is considerably lower than the previous increase of 254 thousand.
A notable event in the UK will be the unveiling of the first Labour budget in nearly 15 years by Treasury Secretary Rachel Reeves.
Intraday technical picture:
Judging by the unfolding situation on the 4H chart of GBP/USD, we observe a local uptrend, from which a recovery is still plausible. The closest growth target is located in the vicinity of the dotted resistance at 1.3044.
The Japanese yen remains close to a multi-month low against the US dollar. Uncertainty surrounding a potential interest rate hike by the Bank of Japan, coupled with optimistic market sentiment, continues to exert pressure on the yen.
Possible technical scenarios:
The daily chart shows that the USD/JPY price is attempting to consolidate above the level of 153.09. From this point, an increase towards the next target of 154.83 is feasible. However, price targets may be revised following the BOJ meeting and the US labor market report.
Fundamental drivers of volatility:
This week, market attention will be directed towards the BOJ monetary policy meeting, as well as the release of significant macroeconomic data from the US.
The yen faces pressure from expectations that the ruling coalition's loss of parliamentary majority could complicate the BOJ's ability to tighten monetary policy. What’s more, the enhanced risk appetite in the market is diminishing interest in safe-haven assets like the yen.
That being said, there are concerns that the Japanese authorities may intervene to support the yen, which offers some backing to the currency.
Market participants are also anticipating the release of the ADP private sector employment report in the US and the preliminary GDP report, which is projected to indicate a 3% year-over-year growth in the economy for the third quarter. Should the data prove strong, it may bolster the dollar.
Intraday technical picture:
As we can see on the 4H chart of USD/JPY, the price has yet to establish its position relative to the level of 153.09; however, if the news leads to an update of this week's high, the growth may persist towards the resistance at 154.83.
The AUD/USD pair rose on Wednesday amid weakness in the US dollar and the Australian inflation report. Its further direction will now hinge on data from the US and the performance of the Australian dollar.
Possible technical scenarios:
According to the daily chart, the AUD/USD pair is positioned below the 0.6582 level. If it fails to overcome this level, the quotes may continue to decline toward the 0.6498 level.
Fundamental drivers of volatility:
Data released on Wednesday morning indicated that inflation in Australia decelerated to 2.8% in the third quarter, marking the lowest level in 3.5 years. However, core inflation remains elevated, creating uncertainty regarding the commencement of monetary easing by the Reserve Bank of Australia (RBA).
In this context, the probability of interest rate cuts in December and February has decreased to 24% and 44%, respectively, with most analysts anticipating that the first easing may not occur until April 2025. The RBA maintained the interest rate at 4.35%, highlighting that it is sufficiently restrictive to mitigate inflation and support employment.
The US dollar will dictate the direction of AUD/USD for the remainder of the week. Starting Wednesday, labor market data will be released, and Friday's official employment report may trigger a significant increase in the volatility of the American currency. In particular, a deterioration in labor market conditions may weaken the dollar, as it would heighten the likelihood of a sharp reduction in Fed rates.
Intraday technical picture:
The 4H chart of AUD/USD demonstrates an attempt to retreat downward from the resistance level of 0.6582. The pair now needs to consolidate below the previous lows, which will pave the way for the price to reach the support at 0.6498.
Gold prices have reached a new all-time high this week, bolstered by political uncertainty in the US and a slight weakening of the US currency.
Possible technical scenarios:
On the daily chart of XAU/USD, there’s a consolidation above the level of 2762.44, and if this support remains intact, the next growth targets will be at the levels of 2816.78 and 2948.01.
Fundamental drivers of volatility:
Gold prices established a new all-time high on Wednesday, as the dollar, with which the precious metal has an inverse correlation, experienced a slight decline.
In addition, uncertainty in the markets leading up to the US presidential elections may fuel increased demand for safe assets such as gold.
The rise in precious metal prices is also attributed to uncertainty surrounding the Federal Reserve's future monetary policy. However, data from the US this week, particularly Friday's employment report, may provide more clarity on this issue.
Intraday technical picture:
On the 4H chart of XAU/USD, a price pullback to the support level of 2762.44 is likely. A reversal from this level upward will enable quotes to continue rising toward the next resistance at 2816.78.
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