**The USD Lower to Start the Trading Week: A Technical Look at the EUR/USD, USD/JPY, GBP/USD**
*Credit: Adam Button, InvestingLive.com*
The US dollar began the trading week on the defensive, experiencing declines against several major currency pairs. As global markets adjust to shifting expectations on Federal Reserve policy and digest recent economic data, traders are focused on technical developments in the key pairs: EUR/USD, USD/JPY, and GBP/USD. This article presents a detailed technical analysis of each pair to provide insights into potential price movements and chart patterns influencing forex trends in the week ahead.
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### USD Overview: Weaker to Begin the Week
– The US dollar index (DXY) saw a decline following Friday’s close, prompted by softer inflation data and dovish signals from Federal Reserve officials.
– After holding firm for much of the previous week, the greenback finally gave way as traders reassessed the timeline of potential U.S. interest rate cuts.
– Market sentiment is also shifting due to increasing speculation about central bank divergence, especially as the European Central Bank and Bank of England maintain tighter policy stances relative to the Federal Reserve.
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### Technical Analysis: EUR/USD
The EUR/USD pair kicked off the week on a bullish note, breaking higher after finding support near 1.0700. The technical picture now presents several important factors to monitor.
**Key Levels:**
– Support: 1.0700 – Recent low, marking a floor for bullish momentum.
– Resistance: 1.0800 and 1.0862 – 1.0800 is a round number psychological resistance and 1.0862 marks last week’s high.
– Intermediate support: 1.0760 area, coinciding with intraday pullbacks and minor consolidation zones.
**Chart Patterns and Indicators:**
– **Daily Chart**: Friday’s candlestick formed a bullish engulfing pattern, suggesting buyers have regained control for now.
– **Moving Averages**: The pair is currently testing the 50-day moving average, a commonly watched dynamic resistance. A definitive break and close above this level would open the path to 1.0862.
– **Momentum**: The Relative Strength Index (RSI) is rebounding from neutral territory, indicating renewed buying interest but not yet in overbought territory.
– **Fibonacci Retracements**: The 38.2 percent retracement of the downturn from the May high clusters around 1.0800-1.0810, offering potential resistance.
**Short-Term Trading Implications:**
– Bulls will be watching for a clear break above both 1.0800 and 1.0862 to confirm a move toward the next resistance at 1.0900 and potentially 1.1000.
– Failure to hold above 1.0700 puts the pair back at risk of a steeper drop, targeting 1.0640 (recent swing low) and then 1.0600.
– There is a minor bullish bias as long as EUR/USD maintains action above its short-term uptrend line drawn from last week’s lows.
**Fundamental Backdrop:**
– The near-term outlook also hinges on Eurozone economic data, particularly German sentiment indicators and inflation readings.
– However, the overarching influence remains the Federal Reserve’s rate path. Any surprise hawkish commentary or strong US economic data could rapidly reverse EUR/USD gains.
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### Technical Analysis: USD/JPY
Even as the US dollar slipped broadly, the USD/JPY pair remains comparatively supported, hovering near multi-decade highs. The Bank of Japan’s dovishness contrasts sharply with US yields, maintaining demand for the pair at higher levels.
**Key Levels:**
– Support: 156.00 – Most recent swing low.
– Resistance: 157.70 – The multi-year high set in early June, with 158.00 looming as the next major round-number resistance.
– Minor support:
Read more on GBP/USD trading.