**U.S. Dollar Tests Weekly Lows: Analysis for EUR/USD, GBP/USD, USD/CAD, USD/JPY**
*Based on the article by Christopher Lewis for FX Empire. All credits to the original author.*
**Overview**
The U.S. dollar, a central figure in the global forex market, is currently facing significant pressure as it descends towards weekly lows. The performance of the greenback is key to major currency pairs, including the EUR/USD, GBP/USD, USD/CAD, and USD/JPY. Shifts in U.S. economic data, central bank policy trajectory, and international sentiment have synergized, generating notable volatility across these pairs.
Below, we provide an in-depth analysis of the recent price action, technical setups, and potential market pathways for these four major currency pairs as the U.S. dollar finds itself under scrutiny.
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### U.S. Dollar Under Pressure: Key Drivers
– **Economic Data:** Mixed economic indicators from the U.S., including diverging inflation numbers and softer-than-anticipated employment data, have contributed to the dollar’s weakness.
– **Federal Reserve Policy:** Uncertainty surrounding the Fed’s future rate hikes or potential pauses weigh heavily on the dollar, especially as market participants reassess their expectations.
– **Global Risk Appetite:** Renewed interest in riskier assets supports the dollar’s counterparts while safe-haven demand for the greenback subsides.
– **Comparative Central Bank Action:** Other central banks, especially the ECB and BoE, voice more hawkish tones relative to the Federal Reserve, giving their currencies a boost.
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## Technical and Fundamental Analysis of Major Pairs
### EUR/USD: Climbing Towards Fibonacci Resistance
The euro-dollar pair has taken advantage of the dollar’s retracement, managing to climb sharply over the week.
**Key Factors Influencing EUR/USD:**
– **Eurozone Recovery:** Euro area data has stabilized, with some improvement in both PMI and inflation, though caution persists regarding lingering economic softness in specific regions.
– **ECB Policy:** The European Central Bank maintains a more hawkish stance than the Fed, with policymakers hinting at further tightening if inflation persists.
**Technical Outlook:**
– **Support Levels:** The 1.0800 mark remains key support; a decisive break below could signal renewed dollar strength.
– **Resistance Levels:** The pair is approaching a significant resistance zone near 1.0900, coinciding with the 50% Fibonacci retracement of the previous downtrend.
**Potential Scenarios:**
– Bullish continuation if the pair closes above 1.0900, exposing the 1.1000 psychological handle.
– Downside risk returns if the greenback regains ground, particularly on strong U.S. economic news or hawkish Fed signals.
**Trading Strategies:**
– Bulls may look for breaks or retests of 1.0900 with tight stops.
– Bears await signs of fading bullish momentum near resistance levels.
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### GBP/USD: Testing the Upper Bound as Sterling Strengthens
Sterling remains underpinned by resilient U.K. data and an assertive Bank of England stance.
**Key Influences:**
– **U.K. Economic Stability:** Despite global risks, the UK economy shows resilience, with labor markets and wage growth holding up.
– **BoE Rhetoric:** The Bank of England signals ongoing caution toward inflation, favoring a prolonged higher rate environment.
**Technical Analysis:**
– **Support:** Initial support is in the 1.2600 region, with further protection at 1.2550.
– **Resistance:** The current test of 1.2750/1.2800 could be pivotal; a successful breach may open 1.3000.
**Scenarios:**
– Sustained momentum above 1.2800 could attract more buying, while failure may trigger a move back to support zones.
– Cable traders should monitor U.K. and U.S. data releases for volatility triggers.
Read more on GBP/USD trading.