The EUR/USD currency is under pressure after the achievement of the framework trade agreement between the United States and the EU, which provides for a 15% tariff on most European goods from August 1.
Possible technical scenarios:
As evidenced by the daily chart, the EUR/USD pair completed the uptrend with a double top reversal pattern. A breakout of the 1.1494 level and consolidation below it will open the way for quotes to support at 1.1191.
Fundamental drivers of volatility:
There has been a trade recovery between the United States and the EU, and the multi-month long-term confrontation has ended with positive factors for the dollar, strengthening expectations for US economic stability. Optimism in the market intensified after the deal was seen as both a diplomatic and economic victory for Washington.
The European side is showing internal political tension. France sharply criticized the deal, calling it a "black day" for Europe, and Germany’s chancellor expressed concern about the significant economic damage. Despite the negative reaction from key EU members, the leadership block has agreed not to introduce countermeasures and has stated its intention to invest in the US economy, which may be seen as a concession, weakening the EU's position on the non-economic front.
From a monetary policy perspective, the ECB is adopting a wait-and-see approach. ECB member Peter Kažimír noted that there are no significant signs of deterioration in the labor market that would justify a rate change in September. Additionally, the influence of trade recovery and inflation in the Eurozone remains unclear, leading to the possibility of a rapid response from the regulator. This increases the contrast with the United States, where the economic outlook remains more stable.
Intraday technical picture:
As we can observe on the 4H chart of EUR/USD, the pair is testing the strength line and the reverse double top pattern at the dotted level of 1.1557. A consolidation below will signal further price decline, with the targets at levels 1.1494 and 1.1191. An alternative scenario could be the formation of a third reverse pattern in the range between 1.01557 and 1.1738.
The pound sterling is showing weakness against the US dollar, trading near a two-month low.
Possible technical scenarios:
On the daily chart, GBP/USD has completed the formation of a head and shoulders reversal pattern, breaking out the neckline of 1.3378. Now the pair is on its way to the next level of 1.3147.
Fundamental drivers of volatility:
Pressure on the British currency is increasing amid the strengthening of the US dollar. This is caused by the conclusion of a trade agreement between the United States and the EU, which reduced the risks of disruptions in global supplies and supported demand for the American currency. Additional support for the dollar comes from expectations surrounding trade negotiations between the United States and China, during which the tariff truce is expected to be extended.
Domestically, the United Kingdom is facing rising inflationary pressure and weakening consumer activity. High inflation is eroding household purchasing power, as reflected in a decline in retail sales for the tenth consecutive month in July, according to the CBI. Although there was a slight slowdown in the pace of decline, the overall sentiment in the consumer sector remains negative. Employers also report rising labor costs and ongoing economic uncertainty.
Market participants are pricing in the likelihood of the Bank of England cutting interest rates at its next meeting in August, which is putting additional pressure on the pound. Simultaneously, investors are focusing on the upcoming Fed decision, the results of which will be announced on Wednesday. It is expected that the current rate level will be maintained, but special attention will be paid to the regulator's rhetoric regarding inflation and further steps in the field of monetary policy.
Intraday technical picture:
The 4H chart demonstrates that the consolidation of GBP/USD below the dotted level of 1.3378 opens the way for quotes to decline to the target of 1.3147.
USD/JPY is strengthening for the fourth session in a row, reaching a one-and-a-half-week high near 148.70.
Possible technical scenarios:
Judging by the unfolding situation on the daily chart, USD/JPY continues to trade in the range between 145.91 and 148.63, having reached its resistance. A breakout of the 148.63 level and consolidation above will open the way for quotes to the target of 149.94, and later, to the target of 151.96. Otherwise, quotes will return to the support of the 145.91-148.63 corridor.
Fundamental drivers of volatility:
The pair's growth is supported by a combination of a strong US dollar and a weakening yen amid trade optimism and the accommodative policy of the Bank of Japan. Investors remain cautious ahead of the decisive events of the week - the meetings of the Fed and the Bank of Japan.
The Japanese yen is losing its appeal as a safe-haven asset. The probability of the Bank of Japan tightening policy soon is low: inflation is slowing, and political uncertainty in the country is growing. Expectations regarding the regulator's soft stance are putting pressure on the yen and supporting the pair's growth.
The US dollar continues to receive a boost from confidence in the stability of the economy and the maintenance of current Fed rates. Market participants are also watching the upcoming data from the US, including the JOLTS and consumer confidence index, but the main focus remains on the results of the Fed meeting on Wednesday and the Bank of Japan on Thursday.
Intraday technical picture:
Locally, on the 4H chart, it is not yet clear whether the pair will break out of the range between 145.91 and 148.63. The reaction to the Fed's rhetoric will probably allow the price to determine its position relative to the 145.91 level.
The USD/CAD pair is trading around 1.3740 after stopping a three-day rise, but retains potential for further recovery.
Possible technical scenarios:
On the daily USD/CAD chart, we see that the pair has again approached the resistance of the sideways range between 1.3503 and 1.3744, forming a double top reversal pattern. From here, there is a possibility of a breakout of the 1.3744 level with subsequent growth to 1.3861.
Fundamental drivers of volatility:
The main support for the US dollar in the pair is the increasing pressure on the Canadian side in trade negotiations with Washington. Canadian Prime Minister Mark Carney said that an agreement without tariffs is unlikely, and negotiations with the United States are in a tense phase amid the threat of introducing 35% tariffs on Canadian imports.
An additional factor in favor of the US dollar is general trade optimism, which strengthened the position of the American currency after the agreement with the EU and the upcoming negotiations with China. This reduces interest in risk and commodity currencies, including the Canadian dollar, especially amid growing uncertainty in North American trade.
Investors are also focused on the outcome of the Fed meeting on Wednesday. The rate is expected to remain at 4.25-4.50%, but attention will be focused on the regulator's rhetoric. Possible signals of policy easing in September could affect the short-term dynamics of the pair.
Intraday technical picture:
There is no additional data for analysis on the 4H chart of USD/CAD; the further direction of the price will depend on the possibilities of consolidation above the level of 1.3744.
Gold prices are consolidating after falling to a three-week low near $3,300 amid a stronger US dollar.
Possible technical scenarios:
Given the developments on the daily chart, we see that gold has broken through the 3,347.47 level, from where quotes have enough leeway to reach the support of 3,246.72.
Fundamental drivers of volatility:
The precious metal is losing support as market participants are pricing in the Fed keeping rates high for an extended period. This reduces the appeal of gold, which does not provide income, especially against the backdrop of rising US Treasury yields.
Investors remain cautious ahead of key central bank decisions. The main focus is on the Fed meeting, the results of which will be announced on Wednesday. The rate is expected to remain unchanged, but Jerome Powell's comments on inflation and a possible rate cut in the fall may set a new direction for XAU/USD. US macro data, including JOLTS job openings and consumer sentiment, will be of additional interest.
The situation on the geopolitical front is also having an impact: the threat of new sanctions are increasing demand for safe-haven assets. However, general trade optimism after the US agreements with the EU and China reduces global risks, which is holding back gold growth. The current dynamics remain dependent on the balance between geopolitical tensions, dollar strength, and Fed rate expectations.
Intraday technical picture:
On the 4H chart, we see that in the corridor between 3246.72 and 3347.47, the gold price retains the potential for weakening, but locally, the downward movement may occur with rollbacks.
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