**EUR/USD, USD/JPY, and AUD/USD Forecast: US Dollar Edges Higher During Early Thursday Trading**
*Originally written by James Hyerczyk for FX Empire*
In the early hours of Thursday trading, the US Dollar displayed a slight strength across major currency pairs. Driven by investor reactions to hawkish signals from the Federal Reserve and anticipation of important economic data, forex markets are showing cautious optimism. Below, we take a comprehensive look at the performance and forecast for three major currency pairs: EUR/USD, USD/JPY, and AUD/USD.
## Overview of Market Dynamics
Market behavior early Thursday revolves around these core drivers:
– Ongoing monetary policy implications from the Federal Reserve
– Anticipation surrounding US inflation data and its effect on rate expectations
– Shifts in global risk sentiment due to geopolitical concerns and central bank policies
– Recent economic data from major markets including Europe, Japan, and Australia
The US Dollar Index (DXY) rose modestly, supported by a mix of safe-haven flows and expectations that the Federal Reserve may hold interest rates higher for longer than previously forecasted. Traders continue to digest remarks from Fed officials and assess upcoming data, particularly the PCE inflation report, which will be released shortly.
## EUR/USD Technical and Fundamental Outlook
The EUR/USD pair experienced minor selling pressure early Thursday, as the stronger dollar gained favor in the market.
### Technical Forecast
– **Current Price Range**: The EUR/USD is testing the lower portion of a short-term trading range.
– **Resistance Levels**: 1.0870 and 1.0945 remain key upside targets if buyers regain control.
– **Support Levels**: 1.0800 and especially around 1.0760 serve as important areas to monitor. A break below 1.0760 could signal a return to the broader bearish trend.
– **Moving Averages**:
– The 50-day SMA is flattening, indicating indecision
– The 200-day SMA supports the longer-term consolidation pattern
### Fundamental Insights
– Recent comments from ECB officials reinforced a dovish tilt, contrasting with the Fed’s hawkish stance.
– Economic indicators such as PMI data from the Eurozone revealed continued weakness, especially in manufacturing.
– Traders are cautious ahead of the US PCE data, which could further impact interest rate outlooks on both sides of the Atlantic.
Given the fundamental divergence between the Fed and ECB, traders may continue favoring the US Dollar in the short term, unless there is a shift in Eurozone macroeconomic trends or unexpected central bank rhetoric.
## USD/JPY Eyes Resistance as Treasury Yields Support Demand
The USD/JPY pair edged higher, driven largely by climbing US Treasury yields and the Bank of Japan’s reluctance to accelerate any rate hikes.
### Technical Forecast
– **Resistance Levels**:
– Key psychological level at 160.00, with the next target around 161.80 if momentum continues
– **Support Levels**:
– Immediate support lies at 158.25
– Stronger support is noted around 156.80, near the 50-day moving average
– **Trend Context**: The USD/JPY remains in an uptrend on most timeframes, supported by interest rate differentials
### Fundamental Insights
– Bank of Japan maintains ultra-loose monetary policy, providing a stark contrast to the US.
– Recent remarks by BOJ officials appear more cautious regarding further policy tightening, despite gradually rising domestic inflation.
– Higher US Treasury yields have increased attractiveness for dollar-denominated assets, which supports USD/JPY.
### Risk Factors
– Interventions from Japanese officials, particularly if the Yen weakens to unsustainable levels, could disrupt the pair’s upward momentum.
– Unexpected shifts in market sentiment due to geopolitical concerns could also affect the near-term trend.
## AUD/USD Grapples with Risk Sentiment and Commodity Trends
The AUD/USD pair remains under pressure amid global risk aversion
Explore this further here: USD/JPY trading.