Title: US Dollar Price Action Setups: EUR/USD, GBP/USD, USD/JPY, and USD/CAD
Original Author: James Stanley, Forex.com
Date: October 3, 2025
The U.S. dollar has demonstrated heightened volatility as markets respond to shifting expectations around Federal Reserve policy, influencing major currency pairs such as EUR/USD, GBP/USD, USD/JPY, and USD/CAD. Traders are closely examining recent price movements and technical levels for hints on potential short- and long-term trends. This analysis, based on insights from James Stanley of Forex.com, explores the potential setups across four major forex pairs, offering an overview of technical chart patterns and possible trading strategies.
Overview: Market Backdrop and Dollar Dynamics
– Recent economic data and policymakers’ comments have impacted market sentiment, strengthening the U.S. dollar across various pairs.
– The greenback has rallied on the back of expectations that the Federal Reserve may maintain higher interest rates for longer due to resilient inflation and a relatively robust labor market.
– Consequently, this policy outlook and accompanying rate differential have placed pressure on other major currencies and driven several FX pairs into technically significant zones.
EUR/USD: Technical Breakdown and Oversold Risks
The EUR/USD pair has seen a pronounced downtrend over recent months, with the U.S. dollar’s strength weighing heavily on the euro.
Key Points:
– The pair recently broke below the long-term psychological level of 1.0500, a price point that has historically acted as both resistance and support.
– Support turned resistance: Previous lows near 1.0516, a notable low from early 2023, now act as potential overhead resistance.
– The RSI (Relative Strength Index) on the daily chart dipped into oversold territory last week, suggesting a short-term pullback may be forthcoming.
– If the current rebound continues, resistance between 1.0516 and 1.0600 may stall any bullish attempts.
– A sustained break above the 1.0600 handle could see the pair test the descending trendline that has contained price action since July.
Outlook:
– Bearish continuation is favored unless bulls reclaim the 1.0600 level with sustained momentum.
– Traders should look for potential short entries at resistance on failed rallies, targeting a return to the 1.0400 area or below.
– Oversold technicals raise the possibility of a relief bounce in the short term, though this would likely be corrective within a broader bearish trend.
GBP/USD: Bearish Trend Continues with New Lows
The British pound has followed a similar path to the euro, weakening significantly against the U.S. dollar as economic challenges mount in the UK.
Technical Developments:
– GBP/USD recently broke below the 1.2120 area, a critical support level that held in both March and May of this year.
– The pair printed a fresh low around 1.2037, with the next major zone of interest near 1.2000, a psychological threshold that could provide temporary support.
– Like EUR/USD, the RSI has dipped into oversold territory on daily timeframes, potentially signaling a short-term bounce.
– Resistance areas to watch include 1.2120 and 1.2200, with sellers expected to reemerge around these levels.
Outlook:
– GBP/USD remains in a firmly bearish trend, with price printing lower highs and lower lows.
– Any rally into resistance may offer renewed short opportunities in line with the prevailing trend.
– Traders should monitor the 1.2000 level for signs of either a break lower or temporary support.
USD/JPY: Bulls Driving Price to Multi-Decade Highs
USD/JPY remains an outlier in FX markets, supported by divergent monetary policies. While the Federal Reserve has maintained a hawkish bias, the Bank of Japan continues to enforce ultra-loose monetary policy, leading to a steady depreciation of the yen.
Highlights:
– USD/JPY extended above the critical
Read more on EUR/USD trading.