Title: Forex Forecast: EUR/USD, USD/JPY, and AUD/USD React to Strengthening US Dollar in Early Tuesday Trading
Original article by David Becker, FXEmpire
The US dollar gained strength in early Tuesday trading, influencing major currency pairs including EUR/USD, USD/JPY, and AUD/USD. Investor sentiment shifted as traders assessed new economic signals from the United States and awaited key data releases expected this week. This update explores how the greenback’s recovery is shaping movements in these critical pairs and what could lie ahead in the short term.
Overview of Market Conditions
The forex market opened the week with the US dollar on firm footing. A combination of rising Treasury yields and signals of economic resilience in the United States contributed to the dollar’s early gains. Market participants are paying close attention to upcoming inflation data which may give additional direction to the Federal Reserve’s monetary policy stance.
Key drivers impacting the forex market this week include:
– Anticipation of key US inflation data to be released later in the week
– Shifts in Treasury yields supporting the dollar’s recovery
– Poor performance or weaker-than-expected economic data from Europe and Australia
– Safe-haven demand and the dollar’s appeal amid global economic uncertainty
EUR/USD: Euro Declines as Dollar Strengthens
The EUR/USD pair declined in early Tuesday trading as the dollar advanced across the board. The pair saw reduced momentum after failing to hold above the 1.0800 level, reflecting the euro’s vulnerability amid market expectations for continued economic divergence between the US and the eurozone.
Key factors influencing EUR/USD:
– The euro lost ground as stronger-than-expected US data reinforced the case for the Federal Reserve to keep interest rates elevated.
– German economic data came in weaker than anticipated, further putting pressure on the European currency.
– Investors are cautious ahead of eurozone inflation numbers and US CPI data later this week, which could redefine directional bias for the pair.
Technical snapshot for EUR/USD:
– The pair traded near the 1.0770 level during early sessions but failed to break higher resistance effectively.
– Technical indicators showed momentum leaning bearish, with the RSI settling below neutral levels and the pair staying below its 50-day moving average.
– Immediate support is located around 1.0750, while resistance lies near 1.0810. A break below support could open the way toward 1.0720 in the short term.
Market sentiment toward the euro remains uncertain, especially given the lack of strong catalysts from the eurozone and the increasing attractiveness of dollar-denominated assets. As long as the US maintains economic outperformance, the downward pressure on EUR/USD may persist.
USD/JPY: Dollar Gains as Yen Weakens Amid Rising US Yields
The USD/JPY pair advanced as the dollar found upward momentum supported by climbing US Treasury yields. Traders appeared to favor the greenback over the yen, which remains weighed down by the Bank of Japan’s accommodative stance and minimal intervention in the currency markets.
Key factors influencing USD/JPY:
– US 10-year Treasury yields edged higher, enhancing the dollar’s carry appeal versus low-yielding currencies like the yen.
– Market volatility remained relatively contained, dampening the yen’s safe-haven demand.
– Expectations continue to build that the Bank of Japan will maintain ultra-loose policy, further eroding the yen’s competitiveness.
Technical snapshot for USD/JPY:
– The pair approached the 157.00 resistance level, with bullish momentum intact.
– Technical indicators pointed toward a continuation higher, with the RSI staying in positive territory and price action reflecting strength above major support levels.
– Should the pair cleanly break 157.00, the next resistance to watch lies near the 158.00 area. Support levels can be identified around 155.50 and 154.80.
While policymakers in Japan have expressed concerns over yen weakness in recent months, no significant interventions have altered its trajectory. As long as the yield differential between Japanese and US bonds widens
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