**Weekly Forex Forecast for DXY, EUR/USD, GBP/USD, and USD/JPY**
*Original Author: Yohay Elam (Forex Factory)*
As global financial markets pivot around central bank policy decisions, economic data surprises, and geopolitical tensions, the foreign exchange market continues to present traders with both opportunities and risks. The US Dollar Index (DXY), along with major currency pairs such as EUR/USD, GBP/USD, and USD/JPY, remains at the center of the action. The week ahead is poised to see significant movement sparked by diverse macroeconomic influences. Below, we’ll break down the critical drivers and technical perspectives for each of these key forex instruments.
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## US Dollar Index (DXY) Weekly Outlook
The US Dollar Index, which tracks the greenback’s performance relative to a basket of major currencies, managed to regain some lost ground. The prior week exposed the dollar to selling pressure amidst signals of possible US Federal Reserve rate cuts and softer-than-expected economic data. However, towards the latter part of the week, the dollar rebounded as risk sentiment soured across markets and yields remained relatively steady.
**Key Drivers:**
– **US Economic Data:** Mixed results out of the US, with some figures indicating softening labor and consumption, while others point to underlying economic resilience.
– **Federal Reserve Policy:** Despite recent dovish language from some Fed officials, policymakers remain non-committal about the timing and scale of any prospective rate cuts, preferring a data-dependent approach.
– **Risk Sentiment:** Tech stock turbulence and concerns over global growth, especially from the Eurozone and China, have intermittently elevated safe haven demand for the US dollar.
**Upcoming Data to Watch:**
– US ISM Services PMI
– Jobless claims
– Wholesale inventories
**DXY Technical Analysis:**
– Initial resistance lies around the 105.80 region, followed by a more significant barrier at 106.50.
– Support is positioned at 104.00, with a move below this level exposing the index to further downside toward 103.50 and 103.00 levels.
– On the daily chart, technical indicators suggest a neutral to slightly bullish structure, though momentum remains fragile and susceptible to shifts in global sentiment.
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## EUR/USD Weekly Forecast
EUR/USD traded volatilely, pressured by both dollar strength and renewed worries about the Eurozone’s economic health. European Central Bank (ECB) officials have signaled cautious optimism, but persistent inflation coupled with sluggish growth continues to weigh on the single currency. Germany and other major EU economies are grappling with weak industrial production, soft business sentiment, and tepid inflation dynamics.
**Key Drivers:**
– **ECB Stance:** There is growing anticipation that the ECB might be among the first major central banks to cut rates, given subdued growth and inflation.
– **Economic Reports:** Disappointing service sector PMIs and underwhelming retail sales data highlight ongoing macroeconomic fragilities in the Eurozone.
– **US-EU Yield Differentials:** Interest rate differentials remain in favor of the US dollar as traders hedge their bets on the pace and timing of monetary easing.
**Upcoming Data to Watch:**
– German Industrial Production
– Eurozone Retail Sales
– ECB speakers and meeting minutes
**EUR/USD Technical Analysis:**
– The pair faces immediate resistance at 1.0800, with further hurdles at 1.0850 and 1.0900.
– Initial support comes in at 1.0720, with a descending pivot towards 1.0660 and then 1.0600.
– Daily momentum indicators are still showing a consolidative bias, although the risk of a downside breach remains elevated.
**Trading Strategy Pointers:**
– Short-term traders may look to sell rallies toward resistance zones, especially if upcoming Eurozone data fails to impress.
– Watch for potential reversal signals around the lower support bands, which could attract bargain hunters on oversold conditions.
Read more on GBP/USD trading.