Title: US Dollar Technical Outlook Across Major Pairs: EUR/USD, GBP/USD, USD/JPY, USD/CAD
Author: James Stanley (original article published on FOREX.com)
As the first quarter of 2024 comes to a close, US dollar volatility remains elevated. After consolidating for much of March, a recent surge in US datasets, including stronger-than-expected payroll and inflation reports, has prompted hawkish shifts in market projections for the Federal Reserve’s policy path. Early-year expectations of multiple rate cuts have now contracted broadly, supporting a firmer US dollar. This article explores recent price action and technical outlooks for the US Dollar Index (DXY), along with four major USD pairs: EUR/USD, GBP/USD, USD/JPY, and USD/CAD.
US DOLLAR INDEX (DXY): BULLISH BALANCE PERSISTS
The US Dollar Index has largely oscillated in a wide range since late 2022. Bullish attempts above the 105.00 level have consistently encountered resistance, while the 100.00 zone has offered support. The index remains within a longer-term consolidation pattern, but signs of bullish momentum are increasingly prevalent in the short-to-medium term.
Key Technical Observations:
– Consolidation Range: The DXY has sustained a broad range between 100.00 support and 105.00 resistance since Q3 2022.
– Rising Trend Channel: Since the mid-July 2023 low near 99.50, the DXY has traded within a rising channel, finding higher lows along the way.
– Resistance Test: The 105.00 ceiling has limited upside in numerous attempts, including those in October and November 2023 and more recently in March 2024.
– Support Areas:
– 103.50: Mid-channel support zone, respected multiple times since February 2024.
– 102.35-102.50: Bullish breakout area from early January, flipped from resistance to support.
– Near-Term Bias: As long as the DXY holds above the 103.50 mid-point, the bias remains in favor of further tests toward the channel top and potentially a breakout above 105.00.
Fundamental drivers also increasingly support US dollar bulls. Sticky inflation, strong labor market conditions, and resilient economic data have cooled expectations of Fed rate cuts in the short-term, providing the USD with a solid macro backdrop.
EUR/USD: BEARISH PRESSURE RESURFACING
The EUR/USD pair has oscillated between 1.0450 and 1.1150 for much of the past year. Recent price action, however, indicates that bearish pressure is beginning to resurface as the dollar gains traction on improving data and shifting interest rate dynamics.
Key Technical Observations:
– Longer-Term Range: The pair has rotated within a horizontal range between 1.0450 support and 1.1150 resistance.
– Double Top Formation: The dual peaks around 1.1139 (July) and 1.1130 (December) emphasize strong supply above 1.1100.
– Resistance Zone: The critical resistance area exists between 1.0950 and 1.1000, a level that capped price movements multiple times, including recently in March 2024.
– Bearish Short-Term Trend:
– Descending channel developing from the March high.
– Lower highs forming around 1.0860 and 1.0800 mark a transition into a near-term downtrend.
– Support Levels:
– 1.0720: Range support that has held since February.
– 1.0650: Fibonacci level and intersection with trendline support.
– 1.0520-1.0550: Multi-month range support and potential double-bottom neckline.
– Bigger Picture Risk: A sustained break below 1.0500 may open deeper downside toward 1.0350 and 1.020
Explore this further here: USD/JPY trading.