Title: U.S. Dollar Weekly Price Action Setups: EUR/USD, GBP/USD, USD/JPY, and USD/CAD
By James Stanley | Original analysis from FOREX.com
The U.S. Dollar has demonstrated a renewed strength during recent trading sessions, as a combination of shifting Federal Reserve expectations and global macroeconomic developments drive notable volatility across major currency pairs. Market participants are increasingly focused on how central banks, especially the Fed, will respond to economic data, particularly inflation figures and the labor market outlook. Against this backdrop, popular USD pairs have shown clear, technical price reactions that suggest possible trading opportunities going forward.
In this comprehensive breakdown, we analyze the price action across several major U.S. Dollar pairs — EUR/USD, GBP/USD, USD/JPY, and USD/CAD — and offer insights based on recent economic developments as well as long-term technical and fundamental trends.
U.S. Dollar Overview
– The DXY U.S. Dollar Index bounced back after a period of June weakness.
– The driver has mainly been economic data showing economic resilience in the U.S., alongside moderating inflation.
– Odds of a Fed rate cut in September have fluctuated based on evolving economic indicators, especially CPI readings and labor market strength.
– Core PCE — the Fed’s preferred inflation metric — continues to show signs of cooling, which influences interest rate expectations.
– With the Federal Reserve maintaining a cautious stance, the dollar has seen bullish interest due to relative strength versus global currencies.
EUR/USD Technical Outlook
The Euro-Dollar pair has been one of the primary drivers of recent USD performance, as it constitutes a majority weight in the DXY Index. After struggles around the 1.0900 level, EUR/USD has faced increased selling pressure in recent sessions.
Key Developments:
– EUR/USD topped out near 1.0915 after breaking out in June, and price has since reversed toward support.
– The 1.0750 level offered interim support but recently gave way.
– A deeper level of support sits at the previously tested range of 1.0660–1.0700.
– Technical indicators show momentum fading on daily timeframes, hinting at potential bearish continuation.
Technical Levels to Watch:
– Resistance: 1.0850, and higher at 1.0915–1.0930
– Support: 1.0700, with major support around 1.0660
Fundamental Influences:
– Divergence between ECB and Fed policy expectations is weighing on the euro.
– While the ECB has already initiated rate cuts, the Fed remains patient, offering further USD support.
– Weak Eurozone economic data (e.g., German industrial orders contraction and slowing PMI figures) has compounded euro softness.
Conclusion: EUR/USD exhibits a bearish technical tone while the broader macro backdrop favors further USD strength. Traders may look for short setups on retests of prior support-turned-resistance zones.
GBP/USD Technical Outlook
Sterling experienced substantial strength in early 2024 but has recently pulled back amid USD gains and domestic economic uncertainty in the UK.
Key Developments:
– GBP/USD struggled to maintain its upward trajectory above 1.2800.
– The pair violated an ascending trendline in recent sessions, signaling a shift in sentiment.
– A key support level near the 1.2615-1.2630 area was tested and held temporarily.
Technical Levels to Watch:
– Resistance: 1.2750 and 1.2800
– Support: 1.2630, with deeper support at 1.2500
Macro Fundamentals:
– The Bank of England (BoE) is leaning toward rate cuts later in 2024, but stronger-than-expected inflation has delayed dovish moves.
– UK inflation remains sticky, especially in core services, which supports cautious BoE communication.
– Political uncertainty ahead of upcoming UK elections also adds risk premiums to GBP.
Conclusion: GBP/USD has broken its bullish structure, and further downside
Read more on USD/CAD trading.