U.S. Dollar Price Action Setups: EUR/USD, GBP/USD, USD/JPY, USD/CAD
Adapted and expanded from an article by James Stanley, Forex.com Senior Strategist
Original Source: Forex.com (https://www.forex.com/en/news-and-analysis/u-s-dollar-price-action-setups-eur-usd-gbp-usd-usd-jpy-usd-cad/)
The U.S. Dollar (USD) has been at the center of global currency market developments, with significant volatility stemming from Federal Reserve policy expectations, inflation data, interest rates, and geopolitical risks. As traders recalibrate their outlooks with shifting economic signals, major currency pairs such as EUR/USD, GBP/USD, USD/JPY, and USD/CAD have shown defining technical setups. This article delves into the current price action of these currency pairs, offering insights into potential short-term and long-term trends based on both fundamental and technical analysis.
1. U.S. Dollar Index (DXY): The Broader View
The U.S. Dollar Index (DXY), which tracks the greenback against a basket of six major currencies, reached a recent peak in April but has since retraced some of its gains. Heading into summer 2024, the index hovers beneath key resistance zones as the Federal Reserve’s rate decision looms.
Key Highlights:
– The DXY touched resistance near the 106.50 level in mid-April, a price level that also triggered a reversal earlier this year.
– The retracement has brought the dollar back to the 105.00 region, a notable support area that had functioned as resistance earlier in 2024, indicating a possible role reversal.
– A significant higher-low formation is budding, suggesting a potential continuation of the bullish trend if the index can find traction.
Key Technical Indicators to Watch:
– Support zone: 104.75 to 105.00
– Resistance zone: 106.20 to 106.50; if breached, next resistance levels could sit at 107.25 and 107.80
– RSI remains neutral to moderately bullish (~55), suggesting more upside is possible without being overbought
2. EUR/USD: Euro Struggles to Rebound Amid Dollar Firmness
The EUR/USD pair continues to face downward pressure, weighed by relative weakness in Eurozone economic data and the divergent outlooks between the European Central Bank and the Federal Reserve. With the ECB potentially leaning toward earlier rate cuts and the Fed maintaining a cautious tone, the Euro has struggled to build consistent bullish momentum.
Technical Setup:
– The pair attempted to reclaim the 1.0900 handle in early April but failed to maintain that level, falling back below key support at 1.0800. This zone had previously functioned as strong support throughout March.
– Bearish momentum remains stronger after the breakdown below the ascending trendline drawn from October 2023 lows. This trendline was broken in April, showing a shift in the bullish structure.
– Price continues to trade below the 200-day EMA, pointing to a bearish medium-term trend.
Support and Resistance Levels:
– Immediate resistance: 1.0800, followed by 1.0900
– Key support: 1.0675, followed by 1.0600 and the yearly low at approximately 1.0515
– A firm break below 1.0675 could spark further downside pressure toward the 1.0500 handle
Fundamental Outlook:
– Germany and France have registered weaker PMI and GDP data, reinforcing Eurozone stagflation concerns
– Speculation around ECB rate cuts before the Fed continues to cap Euro upside potential
– U.S. resilience in labor market and retail sales data still favors the USD
Trade Strategy Ideas:
– Bears may look to fade rallies into 1.0800 or 1.0850
– Bulls may wait for a confirmed breakout above 1.0900 before re-eng
Read more on USD/CAD trading.