US Dollar Price Action Setups: EUR/USD, GBP/USD, USD/JPY, USD/CAD
By James Stanley | Source: Forex.com
The US Dollar continues to show strength in early October, as Federal Reserve policy expectations remain firm. Recent economic data and geopolitical tensions have supported a “higher for longer” narrative around interest rates, which in turn supports the greenback. With that in mind, multiple major currency pairs are nearing key inflection points, offering potential trading opportunities for the week ahead.
This detailed analysis will provide updated technical and price action outlooks on four major US Dollar currency pairs: EUR/USD, GBP/USD, USD/JPY, and USD/CAD.
USD Strength Persists
The US Dollar Index (DXY) continues to trade near yearly highs, reflecting sustained demand for the USD across forex markets.
Key drivers of dollar strength include:
– Firm US economic data, particularly in employment and consumer spending
– Hawkish tone from Federal Reserve members, suggesting more rate hikes are possible or that high rates may remain in place for longer
– Weakness in other major currencies due to dovish central bank policies or economic concerns
– Global uncertainty encouraging safe-haven demand
Technically, the Dollar Index has rallied for ten consecutive weeks, approaching the early 2023 highs without significant resistance. This broad momentum gives confidence to USD continuation trades until evidence of a reversal emerges.
EUR/USD: Nearing Critical Support
The Euro has slumped against the US Dollar, reaching fresh multi-month lows, as the European Central Bank shifts toward a more dovish stance. Weak Eurozone data and the widening policy divergence with the US have accelerated the slide in EUR/USD.
Key technical levels:
– Support zone: 1.0480–1.0500 (2023 March low & psychological support)
– Resistance: 1.0610 short-term resistance, followed by 1.0750
The EUR/USD trend has been firmly bearish since breaking below the 1.0800 level in early September. That breakdown invalidated the earlier bullish structure and activated deeper pullbacks.
Current considerations:
– RSI (Relative Strength Index) is approaching oversold territory on the daily chart, indicating the potential for a short-term bounce.
– A failure to hold the 1.0500 level could open the door to further losses toward the 1.0350 zone from late 2022.
– Short-term rallies into resistance may be viewed by bears as opportunities to re-enter the trend.
Traders watching EUR/USD should monitor sentiment around both ECB policy guidance and US economic data. If US yields continue to rise and risk sentiment weakens, it could accelerate Euro weakness.
GBP/USD: Distance from the 1.2300 Pivot
The British Pound has struggled as the Bank of England adopts a more neutral tone, especially as inflation begins to show signs of moderating. Markets are no longer pricing in aggressive future rate hikes from the BoE, bringing the monetary narrative in line with slowing economic growth.
Technical outlook:
– Resistance: 1.2300 (also former support), followed by 1.2435
– Support: 1.2000 psychological level, then 1.1840 from Q1 lows
Following the break below 1.2435 on September 21, bearish momentum increased substantially. The 1.2300 level subsequently acted as a strong resistance, rejecting multiple rally attempts.
Key observations:
– Trend remains bearish below 1.2300.
– Traders may look for further consolidation near 1.2000 as the pair tests this area.
– Bullish counter-trend traders should use caution, as any bounce needs to clear the 1.2300 resistance to signal a possible reversal.
Like EUR/USD, GBP/USD may remain under pressure if US strength continues and investors seek safer currencies in the face of political and market uncertainty.
USD/JPY: Momentum Toward Intervention Levels
USD/JPY continues its relentless climb, driven by the
Explore this further here: USD/JPY trading.