**Weekly Forex Forecast for DXY, EUR/USD, GBP/USD, USD/JPY**
*By Justin Bennett | Credit: ForexFactory.com*
As markets digest last week’s economic data and look ahead to a fresh round of central bank decisions and releases, forex traders face another pivotal stretch. The US dollar, represented by the DXY index, remains at the heart of the action given its correlations with major pairs like EUR/USD, GBP/USD, and USD/JPY. This week’s outlook examines price action, levels to watch, and the technical narratives driving these heavily traded pairs.
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## US Dollar Index (DXY) Outlook
The US Dollar Index (DXY), which measures the dollar against a basket of currencies, rallied last week after a period of corrective downside in May. The index saw strong support from better-than-expected US payrolls figures and manufacturing data, reigniting expectations that the Federal Reserve will keep rates higher for longer.
**Key Technical Observations:**
– The DXY continues to trade within a well-established uptrend, respected since mid-2023.
– Price action found strong support around the 104.00/103.80 region, a zone that has previously served as resistance, now flipped to support.
– Last week’s surge brought the DXY back above the 105.00 psychological level and the mid-May swing high, suggesting bullish momentum may carry over.
– Resistance is found near the 105.75 – 106.00 region, where previous rallies stalled in April and May.
– Support sits at the recent low near 104.30, followed by the broader 103.80 area.
**Potential Scenarios:**
– **Bullish Continuation:** Closing the week above 105.00 could open the door for a retest of 106.00 and, eventually, the 2023 highs around 107.00.
– **Pullback Risks:** Failure to break 106.00 may prompt profit-taking; a drop below 104.30 would signal a deeper correction.
**Macro Drivers:**
– The FOMC meeting this week will provide crucial cues. Markets expect no rate change, but forward guidance regarding rate cuts in the second half of 2024 remains a potent driver.
– US inflation data (CPI and PPI) will influence the DXY’s short-term swings, especially if figures diverge from consensus.
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## EUR/USD Analysis
The euro’s rebound in May proved short-lived, as recent US dollar strength drove EUR/USD back toward yearly lows near 1.0700. The pair remains sensitive to USD drivers and incoming Eurozone data.
**Technical Structure:**
– EUR/USD trades well below its long-term moving averages, confirming a bearish bias on higher time frames.
– The pair has established a short-term range between 1.0660 and 1.0900 since March 2024.
– Bulls defended the 1.0700 region last week, with Friday’s session closing near 1.0770. This level could now serve as minor support.
– Resistance lies near 1.0800, followed by 1.0880, which marks the upper bound of the recent range.
– A decisive break below 1.0700 would put the March and April lows at 1.0600-1.0620 in play.
**Trading Scenarios:**
– **Bullish Case:** If EUR/USD holds above 1.0770 and manages a daily close over 1.0800, expect a push toward 1.0880 or higher on dollar pullbacks or dovish Fed surprises.
– **Bearish Case:** Sustained weakness below 1.0770 and especially under 1.0700 signals sellers in control, targeting the 1.0600–1.0620 region.
**Eurozone Fundamentals:**
– The European Central Bank cut rates last week, marking a divergence from the Federal Reserve’s more hawkish stance
Read more on GBP/USD trading.