**Weekly Forex Forecast for DXY, EUR/USD, GBP/USD, USD/JPY**
*Adapted and expanded from the original article by Justin McQueen, Forex Factory News.*
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As the FX market heads into another pivotal trading week, global forex traders are watching key macroeconomic developments and pivotal technical levels on major currency pairs including the US Dollar Index (DXY), EUR/USD, GBP/USD, and USD/JPY. With rate expectations in flux and persistent uncertainty across major economies, this comprehensive forecast delves into both technical and fundamental factors likely to drive price action in the week ahead.
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## US Dollar Index (DXY): Caught Between Fed Expectations and Economic Data
The DXY posted a marginal gain for the week but remained range-bound, struggling to spark a directional trend. The path forward for the greenback remains largely tethered to shifting expectations around Federal Reserve monetary policy.
### Key Drivers for the DXY
– **Federal Reserve’s Next Move:** Markets have pared back some of their more aggressive Fed rate cut bets. Stronger-than-expected US inflation and employment data in recent months point to a still-resilient economy, tempering expectations for rapid monetary easing in 2024.
– **Economic Data Focus:** Upcoming CPI inflation figures, retail sales, and consumer sentiment data will serve as critical litmus tests for the Fed’s likely trajectory and could offer the dollar fresh impetus.
– **Risk Sentiment:** Ongoing concerns about US fiscal sustainability and global risk aversion could underpin demand for the dollar as a safe haven.
### Technical Outlook
– The DXY remains capped by resistance in the 105.00-105.50 region, with multiple failed attempts to break through.
– On the downside, the 104.00 level, coinciding with the 200-day simple moving average, is key near-term support.
– Bollinger Bands have compressed, hinting at a potential volatility breakout.
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## EUR/USD: Trying to Mount a Rebound Amid Divergent ECB and Fed Prospects
The euro struggled for direction, oscillating within a narrow band as Eurozone and US economic signals diverged. An uptick in German industrial production and softening US data temporarily supported the pair, but downside pressure persists.
### Key Eurozone Themes
– **ECB Rate Path:** Markets are pricing in European Central Bank rate cuts, with economic growth in the bloc showing persistent fragility, particularly in Germany and France.
– **Disinflation Trend:** Eurozone inflation continues to moderate, making the ECB increasingly dovish.
– **Political Risks:** Emerging fiscal concerns and upcoming European elections may also inject volatility.
### Technical Analysis
– EUR/USD has found support near 1.0650-1.0670, forming a base after repeated tests.
– Resistance lies at 1.0800, where previous rallies have stalled. A daily close above this level would open the door to further gains.
– The relative strength index (RSI) is neutral, and moving averages are flat, confirming the pair’s current range-bound bias.
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## GBP/USD: Awaiting Breakout as Inflation and Growth Data Loom
Sterling traded with a slightly firmer tone amid shifting expectations on Bank of England policy and resilient UK economic numbers. Nevertheless, the pound remains sensitive to developments at the BoE and global risk sentiment.
### Fundamental Highlights
– **Bank of England:** The BoE has signaled that rate cuts are on the horizon, but sticky services inflation and strong wage growth complicate decision-making.
– **Data Calendar:** UK GDP numbers and labor market data will establish market tone for the pound, with any surprises poised to prompt outsized moves.
– **Political Backdrop:** With a general election possible later in the year, political headlines may also steer sentiment.
### Chart Perspective
– GBP/USD has support at 1.2500-1.2530, which has held through several retests.
– Key resistance is up at 1.2750
Read more on GBP/USD trading.