Original article by Vladimir Zernov, sourced from FX Empire
Title: U.S. Dollar Pulls Back as Correction Deepens Across Major Currency Pairs
The U.S. Dollar posted a broader decline in the forex markets on Wednesday, continuing a correction that began earlier this week. Several major currency pairs, including EUR/USD, GBP/USD, USD/CAD, and USD/JPY, reflected this dollar weakness amid a variety of macroeconomic and technical factors. With market participants adjusting their positions ahead of upcoming data releases and central bank comments, the greenback is facing headwinds after a multi-week rally.
The drop in U.S. Treasury yields has put pressure on the dollar as traders recalibrate expectations for potential Federal Reserve policy actions over the next few months. In this article, we’ll break down the latest forex developments, examining the U.S. Dollar Index (DXY) and major pair trends using both technical and fundamental analysis.
U.S. Dollar Index (DXY) — Struggling Below Recent Highs
The U.S. Dollar Index, which tracks the greenback’s value relative to a basket of major currencies, edged lower for the second straight day. After hitting a recent peak near 106, the index has slipped below the 105.50 mark, indicating a modest retreat from its recent rally.
Key insights:
– The dollar has been under pressure as bond yields in the U.S. fell from recent highs.
– The 10-year Treasury yield moved back toward 4.62%, reflecting cautious sentiment ahead of economic data such as the PCE price index, set to be released on Friday.
– DXY remains above key technical support at 105.00, but momentum indicators suggest a pullback may continue in the near term.
– The RSI (Relative Strength Index) shows declining bullish momentum, further supporting speculation of a dollar decline unless new bullish catalysts emerge.
EUR/USD — Euro Strengthens on Risk Sentiment and Falling Yields
The EUR/USD pair saw upside traction on Wednesday, moving past the 1.0700 level after holding strong above support in the 1.0600–1.0630 zone. The euro gained largely as a reaction to an easing dollar, combined with relatively stable European government bond yields.
Key developments:
– The EUR/USD pair broke above near-term resistance at 1.0700, with short-term technicals supporting further gains if bullish sentiment persists.
– Support for the pair is seen at 1.0630, with the 1.0700 level now acting as an intermediate psychological and technical pivot.
– Traders are awaiting Thursday’s flash inflation data from Germany, along with Friday’s pan-European inflation report and the U.S. PCE figures. These data points are expected to influence both ECB and Fed rate expectations.
– Short covering also contributed to the euro’s rise, as traders exited USD-dominated positions.
Technical Outlook:
– RSI indicates neutral-to-bullish momentum, with further upside possible toward the next resistance near 1.0780.
– As long as EUR/USD holds above 1.0630, the bullish case remains valid.
GBP/USD — British Pound Advances as Dollar Weakens
Pound sterling strengthened against the U.S. Dollar, with GBP/USD breaking above the 1.2500 level amid dovish expectations for Fed policy and improving market risk sentiment. Aided by a slight uptick in U.K. economic confidence data, the pound maintained traction.
Supporting factors:
– The pair bounced from key support around 1.2420, with technicals favoring additional gains toward the 1.2580 area.
– Market participants see limited immediate catalysts from the Bank of England, placing focus squarely on dollar moves and U.S. macro data.
– The U.S. PCE report and Fed speakers, including comments from Chair Jerome Powell, are likely to drive volatility in coming sessions.
– The pound’s move was fueled in part by short-term positioning and easing pressure on U
Explore this further here: USD/JPY trading.