**Weekly Forex Forecast for DXY, EUR/USD, GBP/USD, USD/JPY**
*Source: ForexFactory.com, original author Justin McQueen*
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**Introduction**
The foreign exchange markets have experienced heightened volatility in recent weeks, driven by a complex blend of central bank policy shifts, persistent inflationary pressures, and unexpected economic data. As the Federal Reserve and other central banks navigate the path of interest rates, traders have been closely monitoring dollar moves and major currency responses. This weekly forex forecast delves into the outlook for four of the world’s most traded currency pairs and indices: the DXY (US Dollar Index), EUR/USD, GBP/USD, and USD/JPY. By examining recent price action, key levels, and market drivers, this analysis seeks to provide traders with actionable insights for the week ahead.
**DXY (U.S. Dollar Index) Weekly Forecast**
*Dollar Strength, Treasury Yields, and Rate Expectations*
The US dollar has regained a degree of resilience, even as US Treasury yields have recently come off their highs. Several factors are contributing to this dynamic. Persistent uncertainty over Federal Reserve policy, surprising stickiness in US core inflation, and flight-to-safety demand in risk-off periods are all reinforcing the dollar’s near-term appeal.
– Federal Reserve Chair Jerome Powell and other policymakers have been stressing patience with rate cuts, a stance bolstered by robust labor market data and steadfast inflation readings.
– While the broader trend for yields points to consolidation, any further hawkish signals from the Fed could underpin additional dollar upside.
– External developments, such as uneven global growth and geopolitical concerns, have also driven safe-haven flows into the greenback.
*Key Technical Levels*
– The 102.00 mark has become a crucial support area for DXY. The index’s ability to hold above this zone will likely dictate near-term momentum.
– Resistance is seen at 104.00, a level that, if broken, could open the door to an extended move toward 104.50/105.00.
– Momentum oscillators are mixed, indicating some indecision among market participants as they await the next catalyst.
*Factors to Watch*
– US CPI and PPI inflation data releases.
– Further commentary from Fed officials regarding the potential timing and magnitude of rate cuts.
– Shifts in Treasury yields in response to incoming economic data.
**EUR/USD Weekly Forecast**
*ECB Dovishness vs Federal Reserve Resilience*
EUR/USD has met resistance on attempts to recover, with the European Central Bank’s dovish tone weighing on the single currency. ECB President Christine Lagarde has emphasized that disinflation is proceeding as expected, opening the door for possible rate cuts in the coming months. This contrasts with the Fed’s comparatively hawkish messaging, leaving EUR/USD vulnerable to downside corrections.
– Recent euro strength was checked by dovish signals from several ECB Governing Council members, who cited increasing comfort in the trajectory of falling prices.
– At the same time, US economic outperformance and stubbornly high inflation have forced market participants to recalibrate expectations for the first Fed interest rate cut.
– Consequently, spreads between US and German 10-year bonds have begun to widen slightly, favoring the dollar and capping the euro’s recovery potential.
*Key Technical Levels*
– Support is seen at 1.0720, matching the recent swing lows. A decisive breach here could send EUR/USD toward the 1.0650 region.
– On the upside, resistance lies around the 1.0820 area, aligning with both the 50-day moving average and the upper bounds of recent trading ranges.
– Daily momentum indicators point lower, while the Relative Strength Index (RSI) remains below 50, suggesting that sellers currently have an edge.
*Factors to Watch*
– Release of eurozone GDP figures and CPI inflation data.
– ECB members’ speeches and any remarks pertaining to the timing of rate normalization.
– US macroeconomic releases, especially those that could affect Fed
Read more on GBP/USD trading.