**U.S. Dollar Retreats from Weekly Highs: In-Depth Analysis of EUR/USD, GBP/USD, USD/CAD, and USD/JPY**
*Original analysis by Vladimir Zernov, adapted and expanded with additional context and insights.*
The U.S. dollar experienced a pullback from its recent weekly highs as traders weighed the latest economic data, Federal Reserve commentary, and broader macroeconomic indicators. Though the dollar surged earlier in the week due to strong economic releases and hawkish expectations from the Federal Reserve, the greenback saw some profit-taking toward the end of the week. This pullback created opportunities in major currency pairs such as EUR/USD, GBP/USD, USD/CAD, and USD/JPY.
This article provides a detailed technical and fundamental analysis of these major currency pairs, focusing on key levels, macroeconomic drivers, and potential scenarios for the coming days.
## U.S. Dollar Index: Recent Trends and Drivers
The U.S. Dollar Index (DXY), which measures the greenback against a basket of six major currencies, hit its highest levels of the week near 105.80 before retreating to around 105.25 on profit-taking. The dollar’s earlier strength was largely driven by:
– **Stronger-than-expected U.S. economic data**, including robust jobless claims reports and resilient consumer spending.
– **Hawkish comments from Federal Reserve officials**, reaffirming their caution around cutting rates prematurely due to sticky inflation.
– **Safe-haven appeal of the dollar** amid geopolitical volatility and concerns over the global economic outlook.
However, the dollar lost some momentum as Treasury yields eased slightly, giving currency markets room to breathe and allowing rivals like the euro and pound to gain ground.
## EUR/USD Outlook: Support Holds Amid Broad Dollar Correction
EUR/USD, which had dipped below the 1.0700 level earlier in the week, staged a mild recovery and stabilized around 1.0730–1.0760, supported by broad dollar weakness and a slight improvement in investor sentiment toward the eurozone.
**Technical Analysis:**
– The nearest support level lies around **1.0700**. A break below this could lead to further declines toward **1.0660**, followed by **1.0600**.
– On the upside, resistance is located at **1.0790**, close to the 50-day moving average. Beyond that, **1.0835** is a key level to watch based on recent highs.
– The RSI on the daily chart remains neutral, signaling consolidation after the recent downtrend.
**Fundamentals & Macro:**
– Eurozone economic recovery remains tepid, although recent confidence indicators like the ZEW Economic Sentiment Index have shown some uptick.
– The European Central Bank (ECB) is expected to begin cutting rates ahead of the Fed, potentially in June. This could limit EUR gains in the medium term.
– Low inflation across parts of the eurozone has given the ECB room to pivot toward a more accommodative stance.
**Outlook:**
While EUR/USD has found near-term support, its medium-term trajectory remains bearish unless eurozone data improves significantly or the Federal Reserve signals an imminent rate cut.
## GBP/USD: Sterling Supported by Rising Inflation Risks
GBP/USD rebounded from lows around 1.2500 and was last seen trading near 1.2630 as of Friday afternoon. The rally was fueled by U.K. inflation data, which surprised to the upside and cast doubt on the Bank of England’s willingness to cut rates soon.
**Technical Outlook:**
– Support remains firm at **1.2500**, a psychological level and previous consolidation zone.
– Resistance lies first at **1.2705**, with a break above that bringing **1.2780** into view.
– The 50-day exponential moving average (EMA) is acting as dynamic resistance near 1.2670.
**Fundamentals:**
– The U.K.’s
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