**U.S. Dollar Price Action Setups: EUR/USD, GBP/USD, USD/JPY, and USD/CAD Analysis**
*Adapted and expanded from an article by James Stanley, originally published on Forex.com.*
The U.S. Dollar (USD) has seen notable movement recently as global markets continue to react to macroeconomic developments, expectations surrounding the Federal Reserve’s monetary policy, and ongoing geopolitical factors. In this article, we analyze key USD price action setups against major currency pairs including EUR/USD, GBP/USD, USD/JPY, and USD/CAD. We will also include additional insights from current data and other reputable financial sources to provide a more comprehensive outlook.
## Overview of U.S. Dollar Fundamentals
The U.S. Dollar Index (DXY), which measures the USD against a basket of foreign currencies, has shown resilience over the past few weeks. After facing some consolidation, price action has presented signs of potential continuation in certain setups, although macro uncertainties make directional confidence a challenge. Key influencing factors on the USD at this time include:
– **Federal Reserve’s Interest Rate Path**: The Fed remains hawkish, with Chairman Jerome Powell suggesting further rate hikes may be necessary to bring inflation back to target.
– **Inflation Data**: The latest Consumer Price Index (CPI) and Core PCE readings support the Fed’s cautious tone. YoY CPI recently came in at 3.3%, above the Fed’s target.
– **Labor Market Strength**: Non-farm payrolls remain strong, maintaining pressure on inflation and supporting higher interest rate expectations.
– **Global Themes**: Concerns around the Chinese economy, commodity markets (especially crude oil), and geopolitical events in Europe and the Middle East are contributing to safe haven flows into the USD.
Let’s now explore how these broader conditions are reflected in the technical setups of major forex pairs.
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## EUR/USD: Consolidation Around Parity Zone
The EUR/USD pair has stabilized somewhat after retracing from its July highs. The pair currently trades near the 1.0700–1.0800 support zone, which has acted as a significant area of interest over the past year. This region previously served as resistance in late 2022 and early 2023 before being flipped to support during the summer.
### Technical Outlook:
– **Support Levels**:
– 1.0700–1.0750 zone: Previously key resistance, now holding as support.
– Psychological level at 1.0600 remains the next significant support below.
– **Resistance Levels**:
– 1.0930: The breakout point earlier in 2023.
– 1.1000: Round-number resistance, also historically relevant.
### Technical Indicators:
– RSI is hovering near 50, suggesting momentum is neutral.
– Price action moving in a sideways consolidation pattern.
### Key Takeaways:
– A break below 1.0700 could open risk toward the 1.0600 round number.
– If bulls reclaim 1.0930, further topside potential could be explored toward 1.1000 or even 1.1050 depending on sentiment.
### Fundamental Drivers:
– ECB has softened its hawkish tone, with market pricing suggesting rate hikes may be nearing an end, weakening support for the euro.
– Euro area inflation showed signs of easing; Core CPI fell to 5.3% last month from a peak of 5.7% earlier this year.
According to FXStreet, investors now await additional eurozone inflation and PMI data to determine the region’s economic direction.
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## GBP/USD: Bearish Breakdown Below Channel Support
The British Pound has weakened against the USD, extending a bearish breakdown from an ascending channel that held support earlier this year. Cable (GBP/USD) recently broke below trendline and horizontal support at the 1.2600 level, a key psychological area that provided structure throughout Q2 2023.
### Technical
Read more on USD/CAD trading.