**U.S. Dollar Poised for Strength: Market Signals Turn Bullish as EUR/USD Slips**
*Original article credit: Justin McQueen, Forex Factory*
The U.S. dollar has recently begun showing signs of renewed strength, sparking renewed bullish sentiment among investors. With the EUR/USD pair sliding and broader macroeconomic indicators supporting a dollar rebound, the greenback may be entering a new upward trend. Various factors—including robust U.S. economic data, hawkish Federal Reserve expectations, and weaker European growth—are contributing to a shifting outlook in foreign exchange markets.
This article explores the key variables driving the dollar’s strength, examines the EUR/USD technical setup, analyzes tactical insights from strategists, and reviews complementary forecasts from sources such as Bloomberg, Reuters, and FXStreet.
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## U.S. Dollar Outlook: Gaining Momentum
After a period marked by volatility and modest weakness, the U.S. dollar has recently demonstrated signs of resilience. The Dollar Index (DXY), which tracks the greenback’s value against a basket of major currencies, has regained some of the ground lost in the first half of 2024.
**Key drivers behind the bullish dollar outlook include:**
– **Stronger-than-expected U.S. economic data:** Recent figures have shown unexpected resilience in American economic activity, including labor market strength, higher-than-anticipated inflation readings, and robust consumer spending.
– **Persistent inflation pressures:** Higher inflation data has fueled market speculation that the Federal Reserve may delay rate cuts or even consider additional tightening, which supports the dollar.
– **Geopolitical tensions and safe-haven flows:** Rising uncertainty globally, including the ongoing conflict in Ukraine, concerns over China’s economic slowdown, and political instability in Europe, are prompting investors to seek refuge in the U.S. dollar.
– **European economic underperformance:** By contrast, the euro zone’s economy is showing clear signs of weakness, from stagnating industrial production to tepid consumer demand.
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## Federal Reserve Policy in Focus
Monetary policy remains a key driver of currency trends, and recent statements from Federal Reserve officials have reinforced expectations of continued hawkishness. While market participants had priced in rate cuts for late 2024, recent developments have reduced those expectations, supporting the greenback.
**Recent Fed developments:**
– Core PCE inflation, the Fed’s preferred inflation gauge, remains sticky and above the central bank’s 2% target.
– Comments by Fed Chair Jerome Powell and other FOMC members highlight concern over easing financial conditions too fast.
– Futures markets, tracked via the CME FedWatch tool, now show reduced odds of a rate cut at the upcoming FOMC meetings.
According to Barclays analysts, “The path of least resistance for the dollar remains higher, especially in the absence of dovish surprises from Powell or softer labor market data.”
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## EUR/USD Slides: Key Technical and Market Implications
One of the clearest signals of dollar strength can be seen in the EUR/USD pair. The euro has retreated sharply against the dollar, slipping below the critical 1.0800 psychological level. This breakdown marks an important shift in the currency pair’s recent trajectory and suggests renewed bearish pressure on the euro.
**Technical overview of EUR/USD:**
– The pair dipped below both the 50-day and 200-day moving averages, reinforcing a bearish bias.
– Momentum indicators such as RSI are heading toward oversold levels but have not yet indicated reversal signals.
– Market structure shows lower highs and lower lows on the daily chart, a typical bearish configuration.
**Support and resistance levels to watch:**
– Immediate support: 1.0720 (recent swing low)
– Further support: 1.0660 (March 2024 low)
– Resistance level: 1.0890 (50-day MA), followed by 1.0950
Technical analysts from FXStreet note that “Should bearish momentum continue, a move toward the year-to-date lows in the 1
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