Title: The US Dollar Continues Its Upward Momentum
Author: Adapted from an article by Greg Michalowski at ForexLive
The US dollar (USD) has been in a sustained upward trend, gaining strength across multiple currency pairs following recent economic data and technical developments. This momentum has drawn attention from traders, analysts, and investors who are closely monitoring dollar performance in alignment with broader market movements and central bank expectations.
This article offers a detailed breakdown of the USD’s technical outlook as of July 15, 2024. We examine how the dollar is reacting in major pairings, review the currency charts, and identify key levels that traders are watching.
Overview of USD Strength
The dollar’s rise can be traced back to several key economic and market drivers:
– Stronger-than-expected US economic data, particularly inflation numbers, have renewed expectations for sustained Federal Reserve interest rate policies.
– Hawkish tones from Federal Reserve officials continue to support a strengthening greenback.
– Lower-than-forecast inflation in other major economies, such as the Eurozone and the UK, is helping the USD to gain on relative monetary policy expectations.
– Commodity-linked currencies like the Australian dollar (AUD) and Canadian dollar (CAD) are affected by weaker global growth sentiment and commodity price softening.
As a result of these influences, the US dollar index (DXY), which measures the USD against a basket of major currencies, has broken above several technical resistance levels and is consolidating its position within a higher trading range.
Currency Pair Analysis
Let’s take a look at how the USD is performing against key counterparts. Here are the technical levels and fundamental influences that are shaping each pair’s behavior.
EUR/USD
– The euro continues to slide against the USD, losing ground as the European Central Bank (ECB) adopts a more dovish tone relative to the Fed.
– A recent break below the 1.0800 level marked a critical technical shift, opening the door to further downside potential.
– Key support areas to watch:
– 1.0750: This level served as support earlier in the year and may attract buyers.
– 1.0700: A psychological level and a previous resistance-turned-support zone.
– Resistance zones:
– 1.0820 to 1.0850: The area where sellers have stepped in following brief rallies.
The descending channel on the daily chart suggests follow-through momentum could continue if no bullish catalyst emerges.
GBP/USD
– The British pound is also struggling against the US dollar amid signs of cooling inflation in the UK.
– The pair recently tested the 1.2600 level but failed to hold above it, leading to a more bearish outlook.
– Key levels to monitor:
– Support:
– 1.2500: A round number and technical pivot.
– 1.2430: Low from earlier consolidation range.
– Resistance:
– 1.2580 to 1.2625: Near-term ceiling where selling pressure has emerged.
Bearish pressure could continue if upcoming UK data fails to support expectations for further Bank of England tightening.
USD/JPY
– One of the stronger-performing dollar pairs has been USD/JPY, thanks to the Bank of Japan’s continued dovish posture and rising US yields.
– The pair has broken above key resistance at 144.50, extending its bullish leg toward multi-year highs.
– Important price points:
– Support:
– 143.80 to 144.00: Former resistance area, could now act as support on a retest.
– Resistance:
– 145.50: Multi-month highs, may offer short-term resistance.
– 147.00: Longer-term target on sustained momentum.
Japanese officials have made verbal interventions regarding the yen’s weakness, but market impact has been limited.
USD/CHF
– The USD has climbed steadily against the Swiss franc due to relative policy divergence between the Federal Reserve and the
Read more on EUR/USD trading.