**EUR/USD, USD/JPY, and AUD/USD Forecast: US Dollar Continues to Weaken Before FOMC**
*By Christopher Lewis
Adapted and expanded for depth and detail. Source: FX Empire*
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As global financial markets wait for this week’s Federal Reserve interest rate decision, the US dollar continues to experience softness against major currency pairs. The moves in EUR/USD, USD/JPY, and AUD/USD reflect broader anticipation about the US monetary policy outlook, combined with developments in European, Japanese, and Australian economic trends. Here is a detailed analysis, drawing on the original work by Christopher Lewis for FX Empire and expanded with further insights from recent economic developments.
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### Market Overview
The recent downward trend in the US dollar has been influenced by:
– Growing expectations that the Federal Reserve will keep interest rates unchanged at the upcoming FOMC meeting
– Signs of slowing inflation in the US
– Mixed economic data from the US, including softer employment and retail sales numbers
– Ongoing geopolitical risks in Europe and the Asia-Pacific region
Investors have become cautious, leading to position adjustments across the major currency pairs. Here’s a breakdown of recent trends in EUR/USD, USD/JPY, and AUD/USD, complete with fundamental and technical perspectives.
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## EUR/USD Analysis and Outlook
The euro has capitalized on the US dollar’s weakness, as traders price in the likelihood that the Federal Reserve’s rate hiking cycle is at or near its end. Meanwhile, the European Central Bank (ECB) remains cautious but has less pressure to cut rates in the immediate future, thanks to stubborn inflation in the euro area.
**Key Drivers for EUR/USD:**
– **US Dollar Direction**: A weaker USD has provided upside for the pair, particularly as yields on US Treasuries have stabilized or retreated.
– **ECB Stance**: The ECB has indicated a pause in hikes, but persistent inflation provides underlying support for the euro.
– **Economic Data**: Recent Eurozone Purchasing Managers’ Indexes (PMIs) have shown resilience, helping to offset earlier recession concerns.
– **Technical Factors**: EUR/USD breached minor resistance levels and is trending above key moving averages.
**Technical Analysis:**
– **Support Levels**: 1.0720, 1.0680
– **Resistance Levels**: 1.0830, 1.0890
EUR/USD has built a bullish momentum, holding firm above its near-term support levels. A break above 1.0830 opens the door for further gains toward 1.0890. On the downside, a fall back below 1.0720 would signal renewed USD strength or euro area concerns.
**Broader Context:**
The euro’s strength remains fragile and vulnerable to shocks, particularly if US data surprises to the upside or if there is a flare-up in European geopolitics. However, as long as the market narrative centers on the end of the Fed’s hiking cycle, EUR
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