Title: U.S. Dollar Hits New Highs as Market Waits for Powell Comments: EUR/USD, GBP/USD, USD/CAD, and USD/JPY Analysis
Source: Originally reported by Vladimir Zernov, FX Empire
The U.S. dollar extended its upward momentum as traders sharpened their focus on upcoming comments from Federal Reserve Chair Jerome Powell. Renewed optimism in the greenback followed robust economic data which reinforced expectations that the Fed may delay interest rate cuts. The dollar’s strength sent ripples through the major currency pairs, with EUR/USD, GBP/USD, USD/CAD, and USD/JPY reacting accordingly.
This comprehensive analysis will examine the movements and key drivers for each of these major currency pairs in light of the rising dollar and the broader macroeconomic backdrop.
U.S. Dollar Reclaims Strength Near Multi-Week Highs
The U.S. Dollar Index, which measures the greenback against a basket of six major currencies, recently surged past resistance levels, approaching multi-week highs.
Key drivers behind the dollar’s strength:
– Stronger-than-expected U.S. job data fueled expectations of a delay in rate reductions.
– The March JOLTs job openings report indicated continued labor market resilience.
– Federal Reserve officials continued their cautious tone regarding rate cuts.
– Market participants shifted expectations for the first rate cut further toward late 2024.
Traders are bracing for comments from Fed Chair Jerome Powell, which could offer insights into monetary policy direction in the second half of the year. Upcoming U.S. economic indicators, such as inflation and labor market data, will also weigh heavily on the Fed’s timeline.
EUR/USD: Weak Performance as Euro Faces Dual Pressure
The EUR/USD pair weakened amid broad dollar strength and ongoing economic challenges in the eurozone.
Recent developments affecting EUR/USD:
– The pair fell below the 1.0750 level, also testing the 50-day moving average as resistance.
– Economic sentiment in the eurozone remains muted.
– Inflation in the eurozone remains lower than U.S. inflation, making future ECB rate hikes less likely.
Technical overview:
– Immediate support lies near 1.0700, a level that previously acted as psychological support.
– A break below 1.0700 could pave the way for further downside toward 1.0650 or even 1.0600.
– Resistance is visible at 1.0750 and stronger resistance forms around the 200-day moving average near 1.0820.
Upcoming eurozone indicators such as GDP growth data and producer price information will be crucial in determining the short-term trajectory. Unless there is a significant shift in euro-area fundamentals, the trend in EUR/USD may remain bearish.
GBP/USD: Retreats After Recent Surge
The British pound found itself under pressure after an extended run fueled by more hawkish Bank of England (BoE) expectations. However, this momentum stalled as the U.S. dollar rallied.
Current factors influencing GBP/USD:
– BoE officials have struck a cautious tone, leaving the door open for potential rate cuts later this year.
– U.K. consumer inflation has moderated, decreasing urgency for further tightening.
– The pair failed to hold gains above 1.2600, reflecting broader weakness due to stronger U.S. data.
Technical analysis:
– GBP/USD dropped below the key 50-day moving average, which lies around 1.2570.
– Support zones are visible at 1.2500 and 1.2430.
– Resistance levels include 1.2580 and 1.2660.
While the BoE has hesitated to provide a definitive timeline for rate cuts, lingering concerns about subdued economic growth and weak productivity are placing downward pressure on the pound.
Foreign exchange traders are now looking to U.K. economic reports, including GDP and labor market data, to reassess their positions on sterling.
USD/CAD: Canadian Dollar Sags as Dollar Soars
The Canadian dollar declined as the U.S. dollar
Read more on EUR/USD trading.