**Title: Forex Market Analysis: Dollar Slips Ahead of Key Economic Data, Eyes on Fed’s Future Path**
*By Mitrade News Team*
As the new trading week kicks off, the US dollar is trading on the defensive, losing ground against major currencies in anticipation of significant economic reports and key central bank testimonies. This article delves into the current forex landscape, key drivers influencing market sentiment, and the technical levels traders should monitor to navigate the uncertainties ahead.
## Overview: Dollar Retreats, Markets Brace for Data
The US dollar, which has seen a steady climb in recent weeks, encountered profit-taking and position adjustments on Monday. This cautious stance reflects market anticipation for several pivotal US data releases and crucial testimony from Federal Reserve chair Jerome Powell. Both events are expected to shape expectations for future monetary policy, especially following cooling inflation numbers and mixed signals regarding US economic resilience.
### Highlights
– The US Dollar Index (DXY) fell by 0.2 percent in early trading.
– The euro, sterling, and yen all advanced against the greenback.
– Emerging market currencies capitalized on dollar weakness, with some outperforming pairs driving flows.
– Equity markets were mostly stable, yet cautious, as traders assess the impact of potential central bank adjustments.
## Key Factors Influencing Forex Sentiment
### 1. Upcoming US Economic Data
This week’s trading is dominated by high-impact US economic reports, which are likely to steer currency markets and inform expectations about the Federal Reserve’s next steps.
**Critical Data Releases:**
– **ISM Services PMI:** Scheduled for Tuesday, this report will provide insights into the US service sector’s momentum, a bellwether for broader economic health.
– **ADP Private Payrolls:** On Wednesday, labor data will shed light on the strength of US employment ahead of Friday’s official report.
– **Nonfarm Payrolls (NFP):** The main event on Friday, where markets seek clues about wage growth, jobs created, and possible labor market softening.
Economists expect the NFP data to signal a gradual cooling in jobs creation, reinforcing bets that the Federal Reserve may be in no rush to hike interest rates further. However, a surprise to either side could produce pronounced currency volatility.
### 2. Fed Chair Jerome Powell’s Testimony
Jerome Powell is slated to deliver testimony before Congress midweek. His remarks will be scrutinized for any signals about the timing and likelihood of potential rate cuts, particularly in light of recent inflation deceleration.
– Markets currently price in around 75 basis points of rate cuts before year-end.
– Dovish rhetoric could accelerate dollar selling, while hawkish tones might limit downside.
– Past Powell addresses have sparked intraday volatility, especially for USD pairs.
### 3. Global Economic Performance
Elsewhere, growth concerns persist in Europe, but recent data suggest some stabilization, underpinning the euro. In Asia, the yen remains under pressure due to the stark rate divergence with the US, although Japanese officials have made verbal interventions to curb excessive yen weakness.
– The euro reached its highest level in a week, buoyed by improved risk sentiment and softer US data.
– The British pound was also firmer, benefiting from stronger-than-expected local manufacturing data.
– Emerging market sentiment was broadly supported by dollar softness, with the Mexican peso and South African rand extending recent gains.
## Technical Analysis: Key Currency Pairs
A technical review of major USD pairs reveals important support and resistance levels to watch as the week’s events unfold.
### EUR/USD
– The euro rebounded to test 1.0850 after finding support near the 1.0760 level.
– Initial resistance stands at 1.0880, followed by 1.0930.
– Short-term momentum shows scope for further gains, but a failure to clear resistance could see a retracement.
### GBP/USD
– Sterling has advanced above 1.2700, bolstered by favorable domestic data
Read more on GBP/USD trading.