Original article by PaxForex, sourced from Forex Factory: https://www.forexfactory.com/news/1350583-mid-week-review-for-dxy-eurusd-gbpusd-xauusd-july
Mid-Week Market Analysis: DXY, EUR/USD, GBP/USD, and XAU/USD – July 10, 2024
Traders are navigating a volatile midweek in the Forex market as markets react to a series of economic indicators, global central bank commentary, and geopolitical developments. The focus is intensely fixed on the U.S. Dollar Index (DXY), with significant ramifications for major currency pairs and commodities including the EUR/USD, GBP/USD, and gold (XAU/USD). The market narrative is largely dominated by U.S. Federal Reserve sentiment, inflation expectations, and key macroeconomic releases due later this week.
Overview of the Current Market Landscape
The foreign exchange market has shown sharp fluctuations in recent sessions as investors look for clarity on whether central banks, particularly the Federal Reserve, will tighten policy further or maintain a wait-and-see approach. Market participants are also factoring in upcoming inflation data such as the U.S. Consumer Price Index (CPI) release due later in the week, which could heavily influence the greenback’s direction in the short term.
Key Themes Dominating Midweek Trading:
– U.S. Federal Reserve’s forward guidance remains uncertain, keeping the markets cautious.
– Inflation data from the United States is expected to provide clues about future interest rate moves.
– The DXY is facing resistance near recent highs, and a breakout or pullback could dictate broader currency movements.
– Gold remains confined, reflecting indecision surrounding interest rates and inflation expectations.
– Both EUR/USD and GBP/USD are affected by economic divergences between the eurozone/UK and the U.S.
DXY (U.S. Dollar Index) – Technical and Fundamental Review
The U.S. Dollar Index continues to oscillate, consolidating gains at a pivotal resistance level near 105.00. Investors are attempting to price in Fed Chairman Jerome Powell’s recent comments which hinted at persistent inflationary concerns but offered no concrete path on when a rate cut might occur. Markets are waiting on the CPI release to decide whether the dollar will resume its uptrend or reverse.
Fundamental Drivers:
– Mixed economic data from the U.S. including moderate job growth and steady inflation readings are creating uncertainty.
– Fed minutes suggest caution on premature rate cuts, adding support to the dollar.
– Global risk sentiment is also boosting the greenback, especially as concerns around political instability elsewhere offer a safe haven bid.
Technical Picture:
– DXY is currently testing range resistance at the 105.00 region.
– RSI shows the index is still in bullish territory, though momentum is slowing.
– A firm break above 105.00 could open the door to 105.70–106.00, while rejection might see the index test support levels at 104.20 and then 103.60.
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