**U.S. Dollar Tests Weekly Lows: In-Depth Analysis of EUR/USD, GBP/USD, USD/CAD, and USD/JPY**
*Adapted from analysis by James Hyerczyk at FXEmpire.com*
The U.S. Dollar Index experienced renewed selling pressure this week, pushing it toward its weekly lows as shifting macroeconomic drivers and policy expectations influence the landscape of the global currency market. The greenback’s struggles have reverberated across major pairs, notably impacting the EUR/USD, GBP/USD, USD/CAD, and USD/JPY currencies. This comprehensive analysis will detail the fundamental and technical forces behind these moves, highlight critical support and resistance levels, and outline scenarios to watch as volatility underscores the foreign exchange market.
## Dollar Weakness: Underlying Catalysts
– Persistent U.S. dollar weakness has primarily been the result of increased bets on a Federal Reserve interest rate pivot.
– Softer U.S. economic data, especially related to jobs and inflation, has led traders to believe the Fed will be constrained from maintaining a hawkish stance.
– Macro data releases, including inflation prints and labor market statistics, continue to drive intraday volatility and sentiment across global forex pairs.
– Ongoing uncertainty regarding global economic recovery, energy prices, and geopolitical issues has led to bouts of risk aversion, further weighing on the greenback.
## EUR/USD: Recovery Maintains Momentum
EUR/USD extended gains this week, trading with a firmly bullish bias and testing its strongest levels in over a month. The Euro’s rebound against the U.S. dollar derives both from the dollar’s slide and a slight improvement in Eurozone sentiment.
**Key factors behind EUR/USD strength:**
– Optimistic Eurozone economic prints: Recent analysis of business activity in major economies such as Germany and France suggest that conditions may be stabilizing.
– Expectations of fewer rate hikes or earlier rate cuts by the Federal Reserve have narrowed interest rate differentials, slightly favoring the Euro.
– Technically, EUR/USD has managed to sustain a series of higher highs and higher lows, reinforcing bullish sentiment.
**Critical Levels to Watch:**
– Resistance: The immediate resistance zone is found at the 1.0880 to 1.0900 area. A sustained close above this threshold could invite further buying interest, targeting 1.0960 and then 1.1040.
– Support: Downside protection rests near the 1.0800 handle, followed by the 50-day moving average at approximately 1.0780. Deeper declines could target the 1.0720 region.
**Upcoming catalysts:**
– European Central Bank statements and U.S. CPI releases will be closely watched. A hawkish tilt from the ECB or weaker-than-expected U.S. inflation could further propel EUR/USD higher.
## GBP/USD: Sterling Remains Buoyant
GBP/USD climbed to challenge multi-week highs mirroring the broad-based dollar sell-off and marginally upbeat UK macroeconomic signals.
**Drivers of GBP/USD performance:**
– Weakening dollar environment: As with other major currencies, GBP has benefited from the greenback’s decline.
– UK economic figures: Recent UK PMI data surprised to the upside, stoking confidence in the resilience of the British economy.
– Bank of England expectations: Markets are repricing odds for future BoE moves, with some policymakers hinting at persistent inflation concerns and the necessity of keeping conditions tight.
**Key Levels:**
– Resistance: The immediate topside barrier lies just above 1.2800, with a break and hold opening the way for a rally toward 1.2870 and potentially 1.2930.
– Support: Short-term support emerges at 1.2690, followed by the more significant 1.2630 and then 1.2560.
**What to watch:**
– UK labor market and inflation reports: These will be instrumental in shaping market expectations over BoE policy and Sterling’s near-term trajectory.
– U
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