**EUR/USD, GBP/USD, and EUR/GBP Forecast: US Dollar a Little Soft on Monday**
*Based on an analysis by Christopher Lewis, originally published on FXEmpire.com*
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The week opens with the US dollar displaying a softer tone against major currencies, notably the euro and the British pound. Market participants are closely watching key macroeconomic data, central bank commentary, and technical setups as the multi-month trends in EUR/USD, GBP/USD, and EUR/GBP continue to unfold.
### Macro Backdrop: US Dollar Faces Headwinds
The US dollar’s pullback to start the week aligns with evolving expectations around Federal Reserve monetary policy and global growth. Last week’s data suggested ongoing resilience in the US labor market but persistent signs of disinflation. Meanwhile, yield differentials and risk sentiment are impacting currency flows, with the dollar recently losing some appeal as a safe haven.
**Key Drivers Influencing Forex Markets:**
– **Federal Reserve’s stance:** The Federal Reserve is expected to maintain a cautious approach on rate cuts, yet softer economic data is leading to expectations of an eventual policy pivot.
– **Geopolitical risks:** Investors are monitoring developments in Ukraine, the Middle East, and concerning overall global tensions.
– **Eurozone developments:** Recent data from the Eurozone shows mixed economic signals, with inflation still moderating and growth patchy.
– **UK economic outlook:** The British pound is sensitive to domestic inflation trends, ongoing Bank of England rhetoric, and the performance of the services and manufacturing sectors.
Let’s break down the technical and fundamental outlooks for the major pairs: EUR/USD, GBP/USD, and EUR/GBP.
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### EUR/USD: Bulls Attempt a Bounce
The euro is attempting to recover ground against the US dollar, with the EUR/USD pair bouncing off recent support levels. The softening dollar and hints of stabilization in the Eurozone economy provide a near-term boost for the common currency.
**Fundamental Overview:**
– The Eurozone economic picture remains mixed. While Germany, as the bloc’s economic powerhouse, faces ongoing challenges, recent data from France and Spain have shown signs of stabilization.
– The European Central Bank (ECB) remains cautious. The ECB is mindful of underlying inflationary pressures, though, and market bets for rate cuts by the end of the year remain subdued as policymakers look for more evidence of a sustained downtrend in inflation.
– US economic data from the previous week included softer-than-expected ISM services numbers and a modest rise in initial jobless claims, fostering the dollar’s weakness.
**Technical Analysis:**
– EUR/USD found key support near the 1.0650-1.0680 zone. This region has offered a reliable springboard for buyers in recent weeks.
– The pair is attempting to push above the 1.0720 mark. Sustained trading above this level could open up a move toward the 1.0800 region.
– Momentum indicators, such as the Relative Strength Index (RSI), have ticked up from oversold conditions, indicating buyers are re-entering the market.
– Immediate resistance looms at the 50-day moving average (around 1.0775), while deeper support remains near the 1.0650 area and then at 1.0600.
**Trading Scenarios:**
– **Bullish:** If EUR/USD breaks and holds above the 1.0775-1.0800 region, buyers could target 1.0860 and eventually the psychological 1.0900 level.
– **Bearish:** Failure to hold above 1.0700 could refocus price action toward support at 1.0650 and possibly as deep as 1.0600.
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### GBP/USD: Cable Eyes Further Gains
The British pound made a modest advance against the US dollar in early-week trading. The Bank of England’s cautious messaging combined with a softening greenback provides the backdrop for further cable gains.
**Fundamental Overview
Read more on GBP/USD trading.