Original Article Author: Christopher Lewis
Source: FX Empire
Original Article Title: EUR/USD, USD/JPY, and AUD/USD Forecast – US Dollar Rallies Slightly in Early Friday Trading
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**Forex Market Analysis: US Dollar Shows Modest Strength Against Key Currencies**
The US dollar experienced a slight rally in early Friday trading, reflecting a growing sense of caution in the market. While the overall trend remains uncertain across several major currency pairs, trading activity hints at upcoming moves as economic indicators weigh on sentiment. In this article, we take a deeper look into three prominent currency pairs: EUR/USD, USD/JPY, and AUD/USD. Each of these pairs is influenced by a unique set of economic fundamentals, interest rate expectations, and geopolitical risks. We explore how the US dollar has behaved in relation to these currencies and what traders might expect in the days ahead.
This analysis is based on the observations of Christopher Lewis from FX Empire, whose expertise in technical markets and long-term trends offers valuable insights into current price action.
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**EUR/USD Technical and Market Outlook**
The EUR/USD pair experienced minor losses on Friday as the dollar attracted renewed interest ahead of key US inflation data. From a technical perspective and broader economic context, the euro continues to encounter structural headwinds:
• The euro is struggling to gain traction against a firmer US dollar, primarily due to the divergence in economic performance between the United States and the Eurozone.
• The recent European Central Bank (ECB) decision to hold interest rates steady has done little to support the euro.
• The Federal Reserve remains firm on maintaining higher interest rates until inflation is fully under control, giving the US dollar further support.
Technical observations:
• The 1.07 level has offered notable support recently, as evidenced by Tuesday and Wednesday’s price action. Buyers appear to be stepping in near this area, but the lack of strong follow-through indicates indecision.
• On the upside, resistance for EUR/USD appears near the 1.09 level, an area that coincides with the 50-day EMA and previous breakdown zones.
• Overall, the pair remains in a consolidation phase and will likely need a fundamental catalyst, like a major economic data release, to break out of its current range.
Possible scenarios:
• If US inflation data surprises to the upside, it could boost the dollar further and send EUR/USD below the 1.07 support level.
• Should inflation data disappoint, it may give investors room to believe rate cuts are approaching, potentially lifting EUR/USD toward the upper resistance band.
Key risk factors to monitor:
• US inflation data
• Policy language from the ECB
• Rate hike timing expectations from the Federal Reserve
• Global risk sentiment and geopolitical developments in Europe
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**USD/JPY Holds Steady as Traders Brace for Next Move**
The USD/JPY currency pair has maintained a range-bound pattern with a slight upward tilt as the US dollar continues to consolidate gains. The pair’s movement is particularly sensitive to US Treasury yields and interest rate expectations from both the Federal Reserve and the Bank of Japan (BoJ).
• The pair continues to move in line with US bond yields, a proxy for future rate expectations. As yield spreads remain wide between US and Japanese bonds, the dollar has maintained support versus the yen.
• The Japanese yen has remained vulnerable due to the Bank of Japan’s reluctance to tighten policy aggressively. While the BoJ has hinted at possible policy normalization, firm action remains absent.
• Intervention risk is still a factor, given recent warnings by Japanese officials regarding sudden currency depreciation. However, the authorities have yet to take decisive steps to protect the yen from further weakening.
Technical analysis:
• Resistance is observed near the recent highs around the 155.50 level. A move above this zone could trigger additional buying interest and open the path to 157.00 in the medium term.
• Support is found near 153.00, which served as a floor during minor pull
Read more on EUR/USD trading.