**EUR/USD, USD/JPY, and AUD/USD Forecast: U.S. Dollar Strengthens Once More**
*Based on original analysis by James Hyerczyk, FX Empire*
As the financial markets move into a new trading week, the U.S. Dollar continues its upward trajectory, bolstered by a variety of macroeconomic forces. Forex markets are seeing renewed volatility as traders respond to a combination of central bank signals, interest rate expectations, and broader economic data coming out of the United States and other major global economies.
This detailed forecast explores the outlook for three major currency pairs — EUR/USD, USD/JPY, and AUD/USD — based on current market developments. Each pair is analyzed in the context of recent data, central bank policy decisions, and anticipated economic outcomes.
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## U.S. Dollar Overview
The U.S. Dollar Index (DXY), which measures the greenback’s strength against a basket of major currencies, has strengthened as a result of resilient economic data and persistent inflation concerns. These developments have led traders to recalibrate their expectations regarding the Federal Reserve’s monetary policy stance.
### Key Drivers of USD Strength
– **Sticky Inflation**: Inflation in the U.S. remains above the Federal Reserve’s 2% target. The latest readings have shown little sign of a rapid slowdown, which keeps interest rate outlooks elevated.
– **Interest Rate Expectations**: Markets are increasingly pricing in prolonged higher interest rates. The possibility of the Fed delaying rate cuts or implementing additional hikes has raised demand for the dollar.
– **Economic Resilience**: The U.S. economy continues to show robustness, with strong employment data and stable consumer spending patterns boosting confidence in continued growth.
– **Yields and Capital Flows**: Rising U.S. Treasury yields, especially in long-term maturities, have made dollar-denominated assets more attractive to global investors seeking better returns.
These factors have contributed to a broad strengthening of the USD, affecting major forex pairs such as EUR/USD, USD/JPY, and AUD/USD.
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## EUR/USD: Bearish Momentum Resumes
The EUR/USD pair has dipped further as the euro weakens against the rallying U.S. Dollar. The pair recently broke below critical technical support levels, suggesting increased bearish sentiment.
### Technical Analysis
– **Recent Price Action**: EUR/USD firmly broke below the 1.0700 psychological level, falling into a consolidation range that may indicate further downside momentum.
– **Support and Resistance Levels**:
– Immediate support lies at 1.0660, followed by a stronger support near 1.0600.
– Resistance appears at 1.0720 and again at 1.0800.
– **Moving Averages**: The pair is currently trading below its 50-day and 200-day moving averages, reinforcing the bearish trend.
### Fundamental Factors
– **Diverging Central Bank Paths**: While the U.S. Federal Reserve remains hawkish due to persistent inflation, the European Central Bank appears more constrained, with signs of an impending economic slowdown in the eurozone.
– **Weak European Data**: Eurozone inflation has been steadily easing, while manufacturing and services data remain soft, weighing on sentiment and the euro’s intrinsic value.
– **Geopolitical Uncertainties**: Ongoing geopolitical tensions, particularly connected to Eastern Europe, have added further downside risk to the euro.
In the near term, unless eurozone economic data surprises to the upside or the Fed takes a decisively dovish turn, the EUR/USD pair could see continued pressure toward lower support levels.
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## USD/JPY: Bulls Push Toward Intervention Levels
The USD/JPY pair has surged, with the yen facing continued weakness amid a stark divergence in monetary policy between the Bank of Japan (BOJ) and the U.S. Federal Reserve. The pair now trades near 157.00, which brings it close to levels that previously sparked intervention warnings from Japanese authorities.
Read more on EUR/USD trading.