**Weekly Forex Analysis: EUR/USD, GBP/USD, and USD/CAD (Video)
By Dhwani Mehta, FXStreet**
The forex market has shown significant movement in recent weeks, influenced by a combination of macroeconomic developments, central bank policies, and shifting risk sentiment among global investors. The EUR/USD, GBP/USD, and USD/CAD pairs have all witnessed notable volatility, shaped by diverse domestic factors and external pressures such as economic data releases, geopolitical events, and monetary policy expectations.
This weekly forex analysis delves into the recent performance of these major pairs, evaluating key support and resistance levels, underlying drivers, and the technical outlook for traders. The evolving narrative around the Federal Reserve’s monetary policy stance, as well as the Bank of England and Bank of Canada’s positions, has set the tone for currency markets, while inflation data, employment reports, and geopolitical risks remain in sharp focus.
### EUR/USD – Struggling Amid Diverging Data and Central Bank Outlooks
The EUR/USD pair has faced ongoing pressure as diverging economic fundamentals between the United States and the Eurozone persist. While the Federal Reserve maintains a cautious tone on rate cuts amid persistent inflationary pressures, the European Central Bank (ECB) is perceived as more dovish, reflecting weak growth conditions and subdued inflation in the euro area.
**Key Drivers:**
– **Divergent Central Bank Stances**: The Federal Reserve’s reluctance to commit to rate cuts as soon as markets anticipated stands in contrast to the ECB, which has opened the door for further policy accommodation if economic weakness persists.
– **Mixed Economic Data**: U.S. data has generally outperformed, with robust non-farm payrolls, strong wage growth, and persistent core inflation all supporting the dollar. Conversely, Eurozone economic releases have missed expectations, reinforcing bets on looser ECB policy.
– **Political Risks**: Elections within the EU and ongoing geopolitical tensions, particularly regarding the Russia-Ukraine conflict, have undermined euro sentiment.
**Technical Outlook:**
– After testing lows near the 1.0650 area, EUR/USD has managed to stabilize, but upside momentum remains limited.
– Immediate resistance is found near 1.0800, with stronger barriers at 1.0880.
– Support is established at 1.0670, with a break below risking a deeper move toward 1.0600.
**Next Week’s Focus:**
– Eurozone inflation and confidence indicators will be closely watched. A soft print may reinforce expectations for ECB dovishness.
– Any hawkish signals from Fed speak or robust U.S. data could keep EUR/USD on the defensive.
### GBP/USD – BoE Cautiousness and Domestic Data Create Choppy Trading
Sterling’s outlook remains clouded by uncertainty around the Bank of England’s policy direction. While inflation in the United Kingdom has started to recede, policymakers have kept rates elevated over concerns regarding wage pressures. Domestic growth data has surprised on the upside at times, but Sterling has struggled to sustain gains in the face of broader dollar strength.
**Key Drivers:**
– **Bank of England Policy Uncertainty**: Although the BoE has hinted at the possibility of eventual rate cuts, policymakers are concerned that strong wage growth and service sector inflation could require a higher-for-longer stance.
– **Economic Indicators**: UK GDP and labor market data continue to oscillate, with growth holding up better than expected, tempering market bets on imminent rate cuts.
– **Political and Fiscal Developments**: Looming general elections and government spending plans introduce additional volatility for GBP.
**Technical Outlook:**
– The 1.2600-1.2620 region has provided a floor for GBP/USD, while resistance is seen at 1.2750 and then 1.2800.
– Momentum indicators suggest a consolidative phase, with downside risks if dollar strength resumes.
**Next Week’s Focus:**
– UK inflation and retail sales figures will
Read more on GBP/USD trading.