**Weekly Forex Forecast for DXY, EUR/USD, GBP/USD, USD/CHF**
*By Ed Moya, as originally featured on ForexFactory.com*
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As we enter a pivotal week for the currency markets, traders are positioning themselves ahead of crucial economic data from both the United States and the Eurozone. The US dollar (DXY) remains at the center of attention as investors weigh the prospect of sustained interest rates against evolving macroeconomic backdrops. This comprehensive analysis by Ed Moya outlines the technical and fundamental outlooks across major currency pairs: DXY (US Dollar Index), EUR/USD, GBP/USD, and USD/CHF.
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## US Dollar Index (DXY): Key Levels and Drivers
After a robust start to the year, the US dollar index (DXY) has entered a phase of consolidation. The greenback’s momentum has stalled due to shifting expectations surrounding the Federal Reserve’s monetary policy trajectory.
### Drivers Affecting the DXY:
– **US Economic Data:** With recent prints of US non-farm payrolls, inflation data, and PMI readings showing resilience, markets had initially anticipated continued dollar strength. However, dovish commentary from Fed officials has moderated these expectations.
– **Interest Rate Path:** The Federal Reserve’s commitment to a ‘higher for longer’ stance on rates is being closely watched. Any signs of an earlier than expected cut could undermine USD support.
– **Risk Sentiment:** Global geopolitical tensions, along with market-wide risk appetite, are influencing flows into the dollar as a safe haven.
– **Comparative Central Bank Outlooks:** As the European Central Bank and Bank of England weigh their own rate paths, cross-currency dynamics continue to shape the DXY’s direction.
### Technical Analysis:
– **Support Levels:** 104.00 – Should DXY break below this area, bears may gain traction, potentially targeting the 103.50 zone.
– **Resistance Levels:** 106.00 – Bulls would need a clear break above here to renew bets on further dollar strength.
### Outlook:
The DXY is expected to trade within a well-defined range as investors await more decisive data. Breakouts will require a clear catalyst, whether in the form of upside surprises in US data or emerging signs of Fed capitulation on rate policy.
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## EUR/USD: Struggling for Direction Amid Mixed Signals
EUR/USD, the most traded currency pair globally, remains rangebound as neither the euro nor the dollar captures a clear narrative lead. Recent Eurozone inflation data have tempered some dovish European Central Bank commentary. However, the prospect of ECB easing remains on the table for later in the year.
### Fundamental Drivers:
– **ECB Policy Communication:** While recent inflation numbers have been stickier than forecast, weak growth prospects across the Eurozone contribute to dovish bias.
– **US-EU Yield Spreads:** The diverging central bank expectations and respective government bond yields continue to drive short-term flows.
– **Geopolitical Risks:** Proximity of the Eurozone to the ongoing Russia-Ukraine conflict puts added risk premium on the single currency.
– **Upcoming Data:** Focus remains on German industrial data, Eurozone PMI releases, and key US prints such as CPI and retail sales.
### Technical Analysis:
– **Support Levels:** 1.0690 – The pair has repeatedly found buyers at this level. A decisive breach could see a test of the April lows.
– **Resistance Levels:** 1.0880 – Bulls need to clear this hurdle for a sustained move higher.
– **Momentum Indicators:** RSI readings currently center around neutral, suggesting lack of conviction.
### Outlook:
The pair is likely to remain highly sensitive to data releases and central bank rhetoric. Traders may continue to fade extremes until a macro catalyst emerges.
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## GBP/USD: Weighed Down by Domestic Headwinds
The British pound has underperformed versus both the euro and dollar in recent weeks. While the Bank of England has retained optionality on rates, a spate
Read more on GBP/USD trading.