**Weekly Forex Forecast for DXY, EUR/USD, GBP/USD, and NZD/USD**
*Article adapted and expanded from the original by Ross Burland, Forex Factory*
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As the global financial landscape continues to evolve, forex traders are keeping a close watch on the world’s major currency pairs. This week, market participants are scrutinizing the US Dollar Index (DXY) alongside EUR/USD, GBP/USD, and NZD/USD, all of which are responding to shifting economic data, monetary policy speculation, and broader risk sentiment. In this analysis, we break down the key technical and fundamental drivers shaping these markets for the week ahead.
## US Dollar Index (DXY): Cautious Optimism Amidst Policy Speculation
After a period of increased volatility, the US Dollar Index (DXY) reflects a technical correction and faces headwinds from shifting expectations around Federal Reserve policy. Recent data and statements from Fed officials have indicated a potentially more cautious approach to rate policy, causing movement across dollar-based pairs. Traders are parsing through economic releases for clues on the Fed’s next moves, with particular attention on inflation figures and labor market data.
**Key Points:**
– **Near-Term Outlook:**
– The DXY buttoned up last week just under resistance at the 105.80 area, marking a short-term ceiling after a rally that began earlier in the month.
– Technical indicators show the index is in a consolidation phase, with daily charts highlighting a potential for further upside if price holds above short-term support (104.80-105.00).
– Any resurgence in risk-off sentiment, sparked by surprise economic prints or geopolitical concerns, could bolster the dollar further.
– **Monetary Policy Factors:**
– The Fed’s messaging remains data-dependent, with recent comments signaling patience on further tightening.
– July and September FOMC meetings will be pivotal, as markets wait for clarity on the central bank’s inflation and employment outlook.
– Softening inflation data or weaker employment figures could dampen DXY strength, while persistent price pressures might see hawkish commentary return.
– **Economic Calendar Impact:**
– This week, US CPI and PPI data take center stage, likely dictating short-term direction.
– Jobless claims and consumer sentiment releases may also offer insight into underlying economic health.
## EUR/USD: Awaiting Clear Direction After Mixed Data
EUR/USD exhibited choppy movements last week, fluctuating amid a mixture of Eurozone releases and dollar moves. Investors are weighing the relative strength of the US and Eurozone economies, as well as divergences in central bank policy.
**Fundamental Overview:**
– **European Central Bank (ECB) Outlook:**
– The ECB is grappling with stubborn inflation and stagnant growth. Market participants expect a dovish bias for forthcoming meetings, though surprise data could shift the tone.
– Any sign of renewed hawkishness, possibly stemming from persistent core inflation, could offer support to the euro.
– **Economic Data:**
– Last week’s PMI readings indicated stagnation in Eurozone manufacturing, but a slight improvement in services.
– Markets will look to the ZEW Economic Sentiment and industrial production figures for cues on recovery.
**Technical Analysis:**
– EUR/USD struggled to break and hold above the 1.0800 level, turning this zone into a significant resistance area.
– A descending channel on the daily chart remains intact, with immediate supports at 1.0700 and 1.0650.
– If bulls manage a sustained breach above 1.0800, focus would shift toward the 1.0900 level, which aligns with the upper boundary of the channel.
**Trader Considerations:**
– Key drivers include divergence in economic data between the US and Europe and evolving risk sentiment.
– All eyes are on US CPI for direction, as inflation differentials impact policy expectations and drive volatility.
## GBP/USD: Defiant Pound Faces Internal
Read more on GBP/USD trading.