**Weekly Forex Forecast for DXY, EURUSD, GBPUSD, and NZDUSD**
*Adapted from the article by Clinton Matthew, originally published at Forex Factory.*
The forex market’s week ahead is laden with crucial risk events as traders assess the latest economic data and central bank commentary. Last week, the US Dollar Index (DXY) steadied after encountering pivotal resistance, while major pairs such as EURUSD, GBPUSD, and NZDUSD each responded uniquely to shifting macro themes. Below, we delve into each asset, unpacking price action and key levels to inform the week’s trade ideas.
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### US Dollar Index (DXY) – Eyes on Resistance and US Data
The US Dollar Index closed last week just beneath the crucial 105.00 resistance, pausing after a sizeable run from early June. The index drew support from hawkish remarks at the Federal Reserve’s latest policy meeting—Chair Powell projected only one rate cut in 2024, contrasting sharply with market expectations of multiple reductions.
However, softer-than-expected US inflation data briefly knocked the index off its weekly highs, underscoring the ongoing struggle between dovish data surprises and policymakers’ reluctance to ease rates precipitously.
**Key factors shaping DXY’s outlook this week:**
– **U.S. Economic Data:** This week features several high-impact data, including the final Q1 GDP reading (Thursday) and the May PCE inflation report (Friday). The Fed’s preferred inflation metric, PCE, is forecast to show persistent price pressures, keeping traders on high alert.
– **Fed Speak:** While the policy path appears largely set for July, any surprises from Federal Reserve speakers can shift sentiment, especially if economic data diverges from expectations.
– **Technicals:** The index faces major resistance at 105.00-105.10, with solid support at 104.20-104.00. Sustainable moves beyond these bands could set the tone for summer.
**Trade considerations:**
– A daily close above 105.00 could encourage further upside to 105.50 or higher.
– If data disappoints, a slide back below 104.20 might re-expose the June lows just above 104.00.
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### EURUSD – Stuck in a Political and Economic Crossfire
EURUSD ended last week virtually flat, stuck near 1.0700 as the euro faces persistent headwinds from both domestic politics and divergence in monetary policy outlooks.
**Headwinds for the euro:**
– **French Political Risk:** Snap legislative elections in France have fueled investor anxiety. Marine Le Pen’s right-wing National Rally threatens a major shakeup, prompting concerns about fiscal spending and debt risk. This backdrop has widened French-German yield spreads, keeping institutional investors wary of accumulating euros.
– **ECB/Fed Divergence:** While the US Fed hesitates to cut, the European Central Bank executed its first rate cut in June and left the door open for more, a recipe for continued euro underperformance.
– **Subdued Eurozone Data:** Growth and inflation data remain soft, offering few reasons for optimism.
**Technical outlook for EURUSD:**
– The 1.0780-1.0800 band acts as resistance after repeated rejections.
– 1.0660 and 1.0600 serve as support zones; below 1.0600, sellers could target 1.0500.
**This week’s EURUSD agenda:**
– Flash eurozone inflation data (Friday) will impact ECB forecasts for the second half.
– Ongoing day-to-day volatility will likely hinge on French opinion polls and political developments.
**Trade strategies:**
– Selling rallies into 1.0780 remains an attractive play amid ongoing risk aversion.
– A close below 1.0650 could trigger a larger push toward cycle lows.
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### GBPUSD – Awaiting UK Election and Bank of England Signals
Sterling weathered a ch
Read more on GBP/USD trading.