Weekly Technical Outlook: USD, EUR/USD, USD/CAD, Gold, Bitcoin
Original Author: Matt Weller
As investors look ahead to a critical week packed with central bank decisions and economic data, the US dollar takes center stage. The Federal Reserve’s interest rate announcement is particularly influential, accompanied by other fundamental catalysts such as the Bank of Japan’s rate policy, Eurozone GDP, and Canadian economic figures. This article offers a comprehensive technical analysis for key forex and commodity pairs including the US Dollar Index (DXY), EUR/USD, USD/CAD, Gold, and Bitcoin.
FEDERAL RESERVE AND DOLLAR EXPECTATIONS
The Federal Open Market Committee (FOMC) is widely expected to raise interest rates by 25 basis points this week, bringing the Fed Funds rate to a target range of 5.25 percent to 5.50 percent. This decision would mark the highest US interest rate in over two decades.
Key notes on the Fed outlook:
– Market participants will be closely examining Fed Chair Jerome Powell’s press conference for insights into future policy.
– Recent positive inflation data has fueled speculation that this could be the last rate hike for this cycle.
– Traders are currently pricing in a 96 percent probability of a rate hike, but post-meeting communication will likely determine directional momentum for the dollar.
– If the Fed signals a more cautious approach in upcoming meetings, the bullish momentum in the US dollar may fade.
Analysts and economists generally expect the Fed to adopt a wait-and-see tone after this week’s hike, due to cooling inflation and weakening leading economic indicators.
Additionally, other macroeconomic developments could influence USD volatility:
– Preliminary US GDP data releases and PCE inflation data due later in the week.
– Bank of Japan’s rate decision and associated forward guidance.
– Eurozone economic figures, including German CPI and Q2 GDP growth.
– Canadian economic activity data and GDP performance.
Let’s explore the technical outlook for key dollar-based assets:
US DOLLAR INDEX (DXY) TECHNICAL OUTLOOK
The DXY has stabilized after showing signs of bullish reversal mid-July. An inverse head-and-shoulders pattern is emerging, suggesting the potential for further upside if confirmed.
Key technical highlights:
– The DXY has reclaimed the 101.00 level after bottoming at 99.60.
– Should bulls maintain momentum, attention will turn to key resistance at 103.00.
– A confirmed break above 103.00 could validate the bullish reversal pattern, targeting 104.20 and perhaps 105.00.
– Support lies at the neckline (around 101.00), and a break below this level might invalidate the bullish thesis.
– RSI is trending higher but remains neutral, confirming the ongoing shift in momentum.
Traders will want to keep an eye on any shift in Fed expectations post-decision that could either drive USD above resistance or cause renewed selling pressure.
EUR/USD TECHNICAL OUTLOOK
EUR/USD reached its highest level since March 2022 earlier this month, peaking above 1.1250. However, the pair has since retreated amidst recovering dollar strength.
Technical factors to watch:
– EUR/USD has pulled back to retest support near 1.1000. A break below this level could open the door for deeper retracement.
– The pair is currently forming a possible bearish divergence on the RSI, indicating waning bullish momentum.
– Key resistance remains at 1.1250 while further downside could target 1.0850 and 1.0750.
– The 50-day moving average is gaining significance as a dynamic support zone to monitor for buyers.
Upcoming fundamental drivers include:
– The European Central Bank rate decision, which is expected to deliver another 25 basis point hike.
– Soft economic data from the Eurozone may pressure the euro if ECB signals a pause or slower pace going forward.
– German inflation and Eurozone GDP reports could heavily sway sentiment.
USD/CAD TECH
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