**U.S. Dollar Pulls Back from Weekly Highs: In-Depth Forex Analysis for EUR/USD, GBP/USD, USD/CAD, and USD/JPY**
*Original article by James Hyerczyk | Adapted and Expanded for Educational Purposes*
The U.S. Dollar retreated from weekly highs midweek after a recent run supported by a string of favorable economic indicators. Market participants are now awaiting further signals from key economic data releases and the Federal Reserve to determine the greenback’s next direction. This comprehensive look at the Forex market analyzes performance in the major pairs: EUR/USD, GBP/USD, USD/CAD, and USD/JPY.
## U.S. Dollar Overview
The dollar initially climbed over the past week, driven by strong macroeconomic indicators including resilient labor market data and sticky inflation metrics, which have reinforced expectations that the U.S. Federal Reserve will maintain higher rates for an extended period.
However, midweek signals suggest some cooling off in the dollar’s momentum. Treasury yields eased, and traders began reassessing the Fed’s policy trajectory, leading to a correction in the dollar index (DXY).
### Key Drivers Behind the Dollar’s Pullback
– **Profit-Taking:** After a strong rally, market participants took profits ahead of key data releases.
– **Treasury Yields:** Yields on 10-year and 2-year Treasuries slightly declined, reducing the appeal of the dollar.
– **Market Sentiment:** Shifts in risk appetite pushed traders into other assets including equities and other major currencies.
With the Federal Reserve’s next meeting weeks away, attention now shifts to data such as the personal consumption expenditures (PCE) price index and job market dynamics to forecast any monetary policy changes.
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## EUR/USD: Attempting a Recovery amid Dollar Weakness
The euro rebounded modestly after falling to multi-week lows earlier in the week. The pair found support as U.S. yields softened and the dollar’s safe-haven appeal diminished temporarily.
### Technical Analysis
– **Support levels:** EUR/USD found buyers near the 1.0670-1.0680 zone, a key area that had previously served as short-term support.
– **Resistance levels:** 1.0770 and 1.0800 serve as immediate resistance zones. A break above these levels would signal further upside potential.
– **Trend outlook:** The overall trend remains bearish in the short term. Only a sustained rally above the 1.0800 level may shift the market bias toward a more bullish stance.
### Fundamental Factors
– **Eurozone Economic Struggles:** The euro continues to face pressure amid weak economic performance in the eurozone. Germany’s manufacturing and industrial production remain subdued, limiting euro rallies.
– **European Central Bank Outlook:** With inflation falling in Europe, the ECB is expected to continue its dovish stance, potentially cutting rates in the near future.
– **U.S. Data Dependency:** Any strong U.S. macroeconomic data could reintroduce dollar dominance, threatening to push EUR/USD lower once more.
### Outlook
Unless U.S. inflation sees a surprising drop, the euro may continue to face headwinds. Traders should look for confirmation from upcoming ECB speeches and inflation data within the euro area for directional cues.
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## GBP/USD: Climbing on Mixed U.S. Data, BOE Reluctance to Cut
The British pound staged a noticeable recovery after falling back early in the week. A combination of dollar weakness and expectations that the Bank of England will not rush to cut interest rates supported GBP/USD.
### Technical Analysis
– **Support levels:** The pair bounced from the 1.2700 structural support, an area that had previously attracted buying interest.
– **Resistance points:** Key resistance lies at 1.2800, followed by 1.2850. These levels mark the previous swing highs.
– **Trend direction:** The short-term trend remains neutral to slightly bullish as long as the pair sustains above
Explore this further here: USD/JPY trading.