EUR/USD, USD/JPY, and AUD/USD Forecast: US Dollar Steady in Early Wednesday Trading
By Kenny Fisher, FX Empire Staff Writer
In the early hours of Wednesday trading, the US dollar showed minimal movement, reflecting a quiet start for currency markets. The lack of significant economic data releases and traders’ anticipation of upcoming macroeconomic events led to relatively calm conditions across major currency pairs, including the EUR/USD, USD/JPY, and AUD/USD. While the greenback remained stable, currency traders are closely watching for clues from the Federal Reserve and other central banks to determine future interest rate trajectories.
This article will delve into each of these crucial currency pairs, analyzing recent price action, technical levels, and fundamentals influencing their movements. Additionally, the broader market sentiment, including inflationary pressures and central bank outlooks, continues to shape expectations and trading strategies.
EUR/USD: Trading Holds Near Elevated Levels
The EUR/USD currency pair traded modestly stronger during early Wednesday sessions, hovering slightly above the 1.08 level after upward movement on Tuesday. The euro’s support has been largely due to a weakening dollar in recent days, driven by a more cautious Federal Reserve and mixed US economic reports.
Key Developments:
– On Tuesday, the euro gained approximately 0.4%, helping the pair reach above the 1.08 mark.
– This appreciation followed softer-than-expected consumer confidence data out of the United States. The Conference Board’s Consumer Confidence Index dropped to 100.4 in June, down from 101.3 the previous month. The decline represents growing public concerns about inflation and the labor market outlook.
– Additionally, the US housing sector appears mixed. New home sales fell by 11.3% for May, an unexpected drop, following a downward revision in the April data. This signals that high mortgage rates and elevated home prices are weighing on buyer sentiment.
The euro’s resilience also comes as investors price in the interest rate trajectory for the European Central Bank (ECB). After initiating its first rate cut in years earlier this month, ECB policymakers are likely to adopt a cautious tone. The euro may continue finding support unless future US data substantially shifts expectations about Fed policy.
EUR/USD Technical Outlook:
– Support Levels: 1.0750, followed by 1.0700
– Resistance Levels: 1.0875, and then 1.0930
– The 50-day moving average remains near the 1.08 handle, serving as a dynamic support level that traders will be monitoring closely.
– Momentum indicators are showing slight bullish divergence, suggesting further upside potential if resistance levels are broken.
Market participants are gauging whether the US economic slowdown, seen in consumer confidence and housing data, is sufficient to cement a dovish pivot from the Federal Reserve. Until there’s more clarity, EUR/USD is likely to trade within a relatively narrow range.
USD/JPY: Struggles to Sustain Gains Above 160
The USD/JPY pair attempted to move higher early Wednesday but remained under pressure near the 160.50 level—a range that has drawn the attention of both traders and Japanese authorities concerned about currency volatility.
Key Developments:
– The dollar slipped modestly by around 0.2% against the yen in the previous session, trimming gains from earlier in the week.
– Japanese officials, including Finance Minister Shunichi Suzuki, reiterated their readiness to intervene if yen weakness continues to pose risks to the domestic economy. While no specific threshold has been disclosed, warnings have intensified as USD/JPY trades above 160.
– The Bank of Japan (BoJ) remains hesitant to implement aggressive rate hikes, even as inflation has been more persistent than expected. However, the BoJ’s move earlier this month to reduce its monthly bond purchases signaled a slight tightening bias.
Despite this, the interest rate differentials between Japan and the US continue to heavily favor the dollar. Unless the BoJ surprises markets with more aggressive action or intervenes in the forex market
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