**U.S. Dollar Price Action Setups: EUR/USD, GBP/USD, USD/JPY, and USD/CAD**
*Original article credit: James Stanley, Forex.com*
The U.S. Dollar (USD) has recently displayed significant price momentum across several major currency pairs. Investors and traders are closely monitoring developments within the foreign exchange market, given the dynamic macroeconomic backdrop that includes Federal Reserve policy projections, inflation trends, and geopolitical tensions. Let’s take a detailed look at the current technical price action and setups for four key pairs: EUR/USD, GBP/USD, USD/JPY, and USD/CAD.
## Broader Context: U.S. Dollar Fundamentals
The U.S. Dollar Index (DXY), a composite that tracks the performance of the dollar versus a basket of six major currencies, remains in focus as the Federal Reserve maintains a cautious stance on interest rate cuts. While markets previously priced in up to three cuts in 2024, stronger-than-expected economic data has led to a reassessment. Consumer Price Index (CPI), Non-Farm Payrolls (NFP), and GDP data have all surprised to the upside at various points in the year, strengthening the dollar.
Key drivers supporting the USD include:
– Resilience of the U.S. labor market
– Higher-than-expected inflation prints prompting hawkish Fed rhetoric
– Safe-haven flows amid geopolitical instability (e.g., Russia-Ukraine conflict, Middle East tensions)
– Divergences between U.S. and other central banks’ monetary policies
With this backdrop, let’s explore the leading USD pairs in greater depth.
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## EUR/USD – Bearish Continuation Below Key Resistance
The EUR/USD pair has continued to face downside pressure as the U.S. dollar regains strength. With the European Central Bank (ECB) preparing for potential rate cuts in the second half of the year and inflation slowing across the Eurozone, market participants are favoring the USD over the EUR.
Technical highlights:
– The pair encountered strong resistance around the 1.0900 level earlier in April and has seen renewed selling pressure since.
– A descending trendline stemming from the December 2023 highs continues to hold as dynamic resistance.
– The 200-day moving average (approximately at 1.0800) has acted as a key technical pivot.
– Recent price action suggests the formation of a lower high, further reinforcing bearish sentiment.
Support and resistance areas:
– Immediate resistance lies at 1.0780 to 1.0800 (200-DMA and recent swing high)
– Key support zones include 1.0600 and then the 1.0500 handle
– A break below 1.0500 could open the door to a retest of the October 2023 lows around 1.0450
Bearish momentum is likely to continue if the pair fails to reclaim the 1.0800 level, especially in the event of stronger U.S. economic releases reinforcing a “higher for longer” interest rate outlook by the Fed.
Strategy considerations:
– Traders may look for short opportunities below 1.0650 with tight stop-losses above 1.0800 resistance
– Swing traders could target 1.0500 and 1.0450 on extended downside moves
– Eurozone economic developments and ECB commentary will be key in short-term risk assessments
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## GBP/USD – Formation of Lower Highs Points to Weakness
The British Pound has seen relative resilience compared to the euro this year, buoyed at times by resilient inflation data in the UK. However, with market expectations signaling potential Bank of England (BoE) rate cuts as inflation cools gradually, Sterling has begun sliding versus a stronger greenback.
Technical observations:
– GBP/USD rallied to 1.2890 in early March but failed to hold those gains.
– A bearish reversal and a series of lower highs have since developed, indicating a potential breakdown in bullish structure.
– The rising wedge pattern evident
Read more on USD/CAD trading.