**Weekly Forex Forecast for DXY, EUR/USD, GBP/USD, USD/JPY**
*Based on analysis by Justin McQueen, ForexFactory.com*
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## Introduction
As financial markets navigate shifting monetary policy signals, geopolitical risk, and evolving economic data, forex traders face a complex environment in early June 2024. Central banks, led by the Federal Reserve and the European Central Bank, remain at the forefront, with inflation, labor market strength, and growth differentials all playing critical roles in determining currency trajectories. This weekly forecast takes a deep dive into several key pairs: the US Dollar Index (DXY), EUR/USD, GBP/USD, and USD/JPY. By synthesizing recent data, technical analysis, and forward-looking expectations, traders can better position themselves for the trading week ahead.
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## US Dollar Index (DXY) Outlook
The dollar’s performance remains closely tied to evolving expectations for Federal Reserve policy. With inflation proving stickier than anticipated and job growth remaining resilient, the Fed’s cautiously hawkish stance has continued to bolster the DXY.
### Key Forces Impacting DXY
– **US Economic Data:**
– Non-farm payrolls continue to surprise to the upside, with job creation comfortably topping forecasts.
– Inflation data, while slightly easing, remains above the Fed’s 2 percent target.
– Mixed consumer confidence and ISM Services/Manufacturing PMIs present some potential for downside risk.
– **Federal Reserve Policy:**
– Markets had priced in multiple rate cuts for 2024 but hawkish FOMC minutes and persistent inflation are tempering those expectations.
– Fed officials continue to speak against premature easing until they see “confidence” in disinflation.
– **Safe-Haven Demand:**
– Geopolitical tensions in Europe and the Middle East periodically spur flows into the dollar as a safe-haven asset.
### Technical Analysis
– DXY has defended support in the 104.00-104.50 zone.
– Resistance is found at 105.75-106.50, a region that capped the last multi-week rally.
– Momentum indicators are neutral, leaving the index susceptible to sharper moves on decisive data.
**Outlook:**
The week ahead will be heavily influenced by the May US CPI report. If inflation remains robust, DXY could retest resistance near 106. If inflation softens or labor data disappoints, the index could break below 104, opening the door towards 103.70 and 103.
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## EUR/USD Analysis
The euro has been under pressure after a series of economic disappointments in the Eurozone, coupled with the ECB signaling a more dovish stance. The divergence between the Fed and ECB rate outlooks is a prime catalyst.
### Key Market Drivers
– **ECB Policy:**
– At its latest meeting, the ECB proceeded with a rate cut, as was broadly expected.
– Guidance suggests a “meeting-by-meeting” approach and hesitancy to commit to an easing cycle.
– Inflation data remains soft, with core CPI under 2 percent.
– **Eurozone Economic Data:**
– GDP growth remains stagnant, with southern economies lagging behind the bloc’s already modest average.
– German industrial production and business confidence are yet to show convincing rebounds.
– **Political Risk:**
– European Parliamentary elections and rising far-right popularity are introducing fresh uncertainty and risk premium in the euro.
### Technical Analysis
– EUR/USD has been unable to break through 1.0900 convincingly, with repeated failures near 1.0880-1.0910.
– Immediate support is located at 1.0780-1.0800, with a break targeting 1.0700.
– The pair is consolidating in a slight downtrend channel.
– Moving averages point to near-term resistance around 1.0870 and longer-term resistance at 1.1000.
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