Title: US Dollar Analysis and Price Action Setups: EUR/USD, GBP/USD, USD/JPY, and USD/CAD
Source: Forex.com
Original Author: James Stanley
URL: https://www.forex.com/en-sg/news-and-analysis/us-dollar-price-action-setups-eur-usd-gbp-usd-usd-jpy-usd-cad/
The US Dollar (USD) has entered a crucial phase as it trades against major currencies amid shifting market dynamics. Driven by economic data, central bank expectations, and global risk sentiment, the USD remains in focus as investors seek clarity on its next trend. Technical developments across key currency pairs like EUR/USD, GBP/USD, USD/JPY, and USD/CAD offer valuable insights into potential price action. This detailed breakdown explores the technical and fundamental landscapes behind the recent USD moves and examines what to expect in the short to medium term.
US Dollar Index (DXY) Outlook
The US Dollar Index (DXY), which tracks the USD against a basket of other currencies, has entered a significant area of technical interest. The index recently pulled back from resistance yet appears to be building a base. With inflation moderating and the Federal Reserve maintaining a cautious posture, traders are closely observing whether the uptrend will resume or stall.
Key Observations:
– The DXY has found support around the 103.00 area, where previous breakout resistance from March now acts as potential support.
– A bullish trendline, originating from mid-May price action, remains intact.
– A strong bounce occurred from the 103.00 zone, signaling buyers’ interest in defending the level.
– Resistance resides around the 104.30-104.60 region, previously acting as a pivot for momentum shifts.
– If a higher-low forms above the 103.00 level, it could signal a continuation of the bullish trend.
Fundamentals continue to support a cautious but firm USD, with Federal Reserve policymakers emphasizing the need for more evidence of cooling inflation before considering interest rate cuts.
EUR/USD Overview
EUR/USD has maintained a bullish tone for much of Q2, bolstered by improving sentiment in the eurozone and a weaker USD. However, price action now faces critical resistance levels, and recent economic data from both regions suggest mixed signals moving forward.
Technical Highlights:
– The pair bounced strongly from the 1.0600 support level in mid-April, launching a three-week rally that formed a rising wedge pattern—a formation often seen as a bearish reversal pattern.
– The rising wedge broke to the downside near the 1.0885 level, indicating a potential trend shift.
– Subsequent price action found support around the 1.0784 level, previously a resistance point from late-April.
– A bounce emerged from this support last week, but the rally paused near the 1.0850 level.
Possible Scenarios:
– If buyers can propel the pair back above 1.0895, EUR/USD could revisit the psychological 1.1000 level.
– If the recent bounce fizzles and the pair returns below 1.0784, sellers could re-target the 1.0700 and 1.0600 levels.
Fundamental Drivers:
– Eurozone inflation has shown signs of slowing, but the European Central Bank (ECB) remains cautious.
– Divergences between ECB and Fed expectations may further influence price action as summer approaches.
GBP/USD Analysis
The British Pound has displayed solid relative strength against the Dollar in recent weeks, boosted by resilient UK economic data and more hawkish commentary from the Bank of England (BoE). GBP/USD broke out of a prolonged technical pattern, signaling more near-term upside could be possible—though key resistance levels lie ahead.
Technical Structure:
– GBP/USD broke above a descending trendline that had confined price since March.
– The pair surged past the 1.2700 handle but soon encountered resistance just shy of 1.2800.
– A pullback to the
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