**Weekly Forex Forecast for DXY, EUR/USD, GBP/USD, USD/JPY**
*Article Credit: Justin Paolini, Forex Factory (June 9, 2024)*
## Overview
Last week’s action in the foreign exchange markets highlighted several pivotal macroeconomic and technical developments, centering on a complex combination of inflation data, monetary policy expectations, and cross-asset flows. As central banks signal the end of the tightening cycle and global growth themes dominate sentiment, traders continue to reassess currency directions and volatility prospects.
This article, following the analysis provided by Justin Paolini at Forex Factory, explores the week-ahead outlook for key forex pairs: the U.S. Dollar Index (DXY), EUR/USD, GBP/USD, and USD/JPY. Fundamental themes, technical reviews, and scenarios for each pair are discussed at length to guide traders through the trading week.
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## Key Market Themes
– **Central bank divergence:** The Federal Reserve maintains a higher-for-longer rate stance while the European Central Bank and Bank of Canada have started easing.
– **U.S. economic resilience:** Recent U.S. data, notably the Nonfarm Payrolls (NFP), has reaffirmed the “exceptionalism” narrative.
– **Inflation and rate cuts:** Markets are attempting to price in the timing and magnitude of future interest rate cuts for developed economies.
– **Risk sentiment:** Equities remain largely buoyant, yet market cautiousness persists ahead of key economic releases.
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## U.S. Dollar Index (DXY)
### Fundamental Factors
– **Strong Nonfarm Payrolls:** Last week’s NFP report was robust (wage growth and job additions well above forecasts), challenging expectations of imminent Fed rate cuts.
– **Fed hold:** Markets are near-consensus on a Fed pause at the June meeting but debate remains around the September meeting and beyond.
– **Yield differentials:** U.S. Treasury yields continue to offer a premium over European and Japanese equivalents.
– **Safe-haven appeal:** Global geopolitics and pockets of risk aversion maintain steady demand for the dollar.
### Technical Analysis
– **Support:** Around 104.20–104.40 (recent lows), then 103.90 (next horizontal support).
– **Resistance:** 105.50 area (recent swing highs), with major resistance above 106.00.
– **Momentum:** RSI on the daily chart is neutral, underpinning a consolidative tone.
### Scenarios
– **Bullish:** Sustained strength above 105.50 can open a move to 106.50 and higher, especially if U.S. data continues to impress and the rate cut narrative gets delayed.
– **Bearish:** A break and daily close below 104.20 puts 103.90 and the lower end of the multi-week range in play.
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## EUR/USD
### Fundamental Factors
– **ECB’s first cut:** The European Central Bank delivered its widely telegraphed 25-basis point cut. Contrary to some expectations of an extended dovish message, the ECB adopted a cautious stance, not pre-committing to further easing.
– **Mixed Eurozone data:** Growth and inflation remain subdued, constraining further upside for the euro.
– **Diverging monetary paths:** The euro remains vulnerable on yield differentials, particularly as the Fed signals patience and the ECB initiates cutting.
### Technical Analysis
– **Support:** 1.0750 (key pivot and recent lows), followed by 1.0700.
– **Resistance:** 1.0850–1.0880 (recent highs and supply zone).
– **Momentum:** The pair trades below its 200-day moving average, which sits as a resistance barrier near 1.0820.
### Scenarios
– **Bullish:** The euro needs to close decisively above 1.0850 for any sustainable rebound towards 1.0940, but fundamentals and flows
Read more on GBP/USD trading.