U.S. Dollar Price Action Analysis: EUR/USD, GBP/USD, USD/JPY, and USD/CAD
Originally written by James Stanley and published on Forex.com
The U.S. dollar has exhibited notable movements in recent sessions, driven heavily by macroeconomic data and evolving expectations around future monetary policy. As of now, a wave of uncertainty around Federal Reserve interest rate decisions continues to drive volatility across major USD pairs. This article explores current technical and fundamental price action setups for four major currency pairs: EUR/USD, GBP/USD, USD/JPY, and USD/CAD.
Market Backdrop
The U.S. dollar is reacting to a shifting economic landscape. Expectations had initially pointed towards multiple rate cuts in 2024 by the Federal Reserve. However, stronger-than-expected jobs data and persistently elevated inflation have caused market participants to reconsider the timing and magnitude of those potential cuts.
Key points influencing U.S. dollar price action include:
– A resilient labor market as evidenced by strong non-farm payroll (NFP) data.
– Inflation readings, such as CPI and PCE, coming in hotter than forecasted.
– Cautious Fed communication suggesting a data-dependent stance rather than committing to imminent rate cuts.
– Diverging economic performance and policy outlooks between the U.S. and other major economies.
The U.S. Dollar Index (DXY) has seen significant fluctuations as traders weigh upcoming data releases and central bank commentary to forecast Fed policy adjustments. This has directly impacted USD-based forex pairs, which we’ll analyze in detail below.
EUR/USD: Focus on 1.0800 Resistance
The Euro has made some effort to recover against the dollar after starting the year under pressure. Recent price action in EUR/USD suggests buyers are attempting to establish short-term control, but the pair is approaching a key technical resistance area near the 1.0800 level.
Key technical highlights:
– The 1.0790 to 1.0800 zone has acted as a swing level in multiple instances since February. This range served as support earlier in the year and has since become resistance.
– A successful breakout and hold above 1.0800 could pave the way for a move towards 1.0900, with further bullish targets around 1.1000.
– On the downside, immediate support lies near 1.0725, with more solid support resting around 1.0650.
Fundamental considerations:
– The European Central Bank (ECB) has been more dovish compared to the Fed, hinting at earlier rate cuts.
– Lackluster economic data from the Euro Area continues to weigh on the currency, keeping euro rallies subdued.
– The currency pair will remain susceptible to U.S. data releases, which could determine whether the dollar continues its broader trend of strength.
Scenarios to consider:
– Bullish case: A daily close above 1.0800 accompanied by rising volume could signal strength and potential follow-through buying.
– Bearish case: Failure to break above resistance or rejection from current levels could lead to a re-test of the 1.0650 region.
GBP/USD: Testing Resistance, Signs of Exhaustion Near 1.2700
The British pound has staged a recovery, partly fueled by improved domestic economic data and a weakening dollar in recent sessions. While GBP/USD reclaimed the 1.2600 figure, the pair is now testing resistance around 1.2700.
Technical factors:
– GBP/USD has experienced multiple rejections around the 1.2700 level in recent months.
– Minor support is seen at 1.2620, while a larger zone of support rests at 1.2500.
– If bulls break above 1.2700, the next key resistance comes in near 1.2800, followed by 1.2870.
From a momentum perspective:
– The pair is showing early signs of trend exhaustion.
– RSI readings on the 4-hour and daily charts are entering over
Explore this further here: USD/JPY trading.