U.S. Dollar Price Action Setups: EUR/USD, GBP/USD, USD/JPY, and USD/CAD
Adapted and Expanded from an Article by James Stanley, Forex.com
The U.S. dollar has experienced volatile shifts in recent weeks as market participants have responded to a mix of economic data, central bank expectations, and geopolitical events. This comprehensive analysis explores the price action setups across major currency pairs tied to the U.S. dollar, including EUR/USD, GBP/USD, USD/JPY, and USD/CAD. We examine each pair’s technical and fundamental landscape to identify potential trading opportunities and provide traders with actionable insights.
Overview of the U.S. Dollar Index (DXY)
The U.S. Dollar Index (DXY), which measures the performance of the dollar against a basket of six major currencies, including the euro, yen, pound, and others, has shown resilience despite occasional dips. The greenback’s direction has largely been driven by:
• Fed policy expectations regarding interest rate hikes or pauses
• Inflation data, particularly the Consumer Price Index (CPI) and Personal Consumption Expenditures (PCE)
• Labor market health through figures such as Non-Farm Payrolls (NFPs) and unemployment rates
• Global risk sentiment, including banking sector concerns, regional conflicts, and economic growth prospects
Recent performance indicates a tug-of-war between expectations of U.S. Federal Reserve tightening and concerns over economic slowdown. This has led to back-and-forth swings around key technical levels on the chart.
Let’s break down how these drivers are affecting the major pairs.
EUR/USD: Sideways Range with Bearish Bias
The euro-dollar pair has mostly traded sideways in recent weeks, lacking a decisive breakout. However, the long-term trend still reflects a broader consolidation between 1.0650 to 1.1100. As of the latest price action, EUR/USD remains capped near the 1.1000 psychological level with weakness showing after attempts to break higher.
Technical Outlook:
• Resistance sits at 1.1000 and 1.1050. A daily close above 1.1050 could allow for a test towards 1.1100 or higher.
• Support is observed at 1.0835 followed by 1.0700, which marks a structurally significant zone.
• The 100-day Moving Average (around 1.0840) serves as dynamic support. A sustained break below it would increase downside momentum.
• RSI (Relative Strength Index) suggests neutral momentum with a slight bearish tilt.
Fundamental Factors:
• Economic divergence remains a key highlight. Stronger U.S. labor market data and sticky inflation contrasts with slower Eurozone growth.
• The ECB appears hesitant on further tightening, especially with German and French economies stalling.
• Visual divergence is evident on 4-hour and daily charts, indicating weakening bullish momentum.
Trading Idea:
Short-term traders may consider range-bound strategies, selling rallies below resistance zones around 1.0950–1.1000 and targeting support near 1.0830–1.0700. Long-term bulls would need confirmation of a breakout above 1.1050 on the back of weaker U.S. data or hawkish ECB rhetoric.
GBP/USD: BoE Cautious, Sterling Seeks Directionality
The British pound has shown instability as the Bank of England (BoE) becomes increasingly cautious. Despite inflation remaining elevated, economic indicators such as PMI data and consumer spending highlight cracks in the foundation of the UK economy. GBP/USD continues to struggle to hold gains, with sellers stepping in around key resistance zones.
Technical Outlook:
• Resistance near 1.2850 holds firmly, with double top patterns forming below it on the 4H chart.
• Support is strong at 1.2600, with a breach potentially opening the door to 1.2450 or even 1.2300.
• The
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