**EUR/USD, USD/JPY, and AUD/USD Forecast: US Dollar Defends Against Selling Pressure**
*By Christopher Lewis, originally published at FXEmpire*
The US Dollar demonstrated resilience in Monday’s trading session, responding assertively to recent selling pressure as key currency pairs faced correction. The broader market remains focused on how central banks, particularly the Federal Reserve, will navigate the economic landscape amid evolving risk sentiment and inflation data. Traders closely tracked EUR/USD, USD/JPY, and AUD/USD, as these major pairs showed signs of reversal from prior trends.
This analysis delves into the technical and fundamental factors driving each currency pair, highlighting the shifting landscape and what traders should watch in the sessions ahead.
—
**EUR/USD: Euro Resumes Downward Momentum**
The EUR/USD pair has found more selling pressure near the 1.07 level, suggesting a continuation of the longer-term bearish trend. The euro attempted a mild rally early in the session, but resistance proved too strong, especially as the US dollar attracted inflows driven by safe-haven demand and relative yield advantage.
Key Observations:
– The euro has failed to meaningfully break above the 1.07 barrier, reinforcing that this level acts as significant resistance.
– Multiple attempts to sustain upward movement have failed, often resulting in shooting star candlestick formations that signal selling opportunities.
– US economic performance, particularly a stable labor market and sticky core inflation, continues to support the Federal Reserve’s hawkish monetary stance, making the greenback more attractive.
– European macroeconomic figures remain mixed, with stagnating growth in Germany and continued concerns about low inflation limiting euro upside.
Technical Outlook:
– The market suggests that any short-lived rally toward the 1.07–1.0750 range presents a potential entry for sellers.
– Clear support is seen near the 1.06 level. A break below this could open the path toward testing the 1.05 zone, which aligns with previous lows and strong psychological support.
– Traders are paying attention to economic data coming later this week, particularly US inflation numbers and European Central Bank (ECB) commentary, which could offer further direction.
Fundamental Factors:
– US Dollar strength continues to be driven by higher-for-longer interest rate expectations from the Federal Reserve.
– On the European side, ECB policymakers are increasingly dovish, hinting at rate cuts if inflation continues its slow descent alongside weak growth.
Projected Scenarios:
– Bearish: Rejection from 1.07 could accelerate the move back to 1.05 or below.
– Neutral to mild bullish: Only a break and close above 1.0750 could challenge the bearish context in the short term, but broader fundamentals still caution against sustained euro strength.
—
**USD/JPY: Yen Weakness Persists as US Dollar Pushes Higher**
The USD/JPY pair saw a renewed push to the upside during Monday’s session, once again highlighting the continued divergence in monetary policy between the Bank of Japan (BoJ) and the Federal Reserve. The pair’s resilience remains underpinned by the US dollar’s yield advantage and lack of intervention from Japanese authorities despite the yen’s ongoing depreciation.
Key Observations:
– The pair climbed noticeably after finding support near the 156 yen mark, quickly approaching resistance levels closer to 157.
– Technical patterns suggest a bullish flag breakout may be underway, pointing to the potential for fresh yearly highs if momentum persists.
– Fundamental divergence remains sharp, as the BoJ maintains ultra-loose monetary policy while the Fed signals no rate cuts in the near term.
Technical Outlook:
– Resistance is seen near 157.50, with a break above this potentially targeting 158–158.50 in the medium-term.
– Key support rests at the 155.50 level. A drop below this could signal a short-term correction, but deeper support lies closer to 154.
– Momentum indicators favor buyers in the near-term, although overbought conditions have intermittently triggered short-lived pullbacks
Read more on EUR/USD trading.