**U.S. Dollar Tests New Highs As Traders Wait for FOMC Minutes: Analysis for EUR/USD, GBP/USD, USD/CAD, and USD/JPY**
*Based on reporting by Vladimir Zernov for FX Empire*
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**Introduction**
The U.S. dollar has continued its upward trajectory, reaching new highs this week as currency traders worldwide turn their attention to the highly anticipated release of the Federal Open Market Committee (FOMC) meeting minutes. With an environment still shaped by sticky inflation, resilient U.S. economic data, and a cautious Federal Reserve, market participants gauge the prospects for rate cuts and how policy may develop into the second half of 2024. This article provides an in-depth analysis of the current forex landscape, focusing particularly on the EUR/USD, GBP/USD, USD/CAD, and USD/JPY currency pairs.
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**Context: The U.S. Dollar’s Recent Rally**
The U.S. Dollar Index (DXY) has demonstrated remarkable strength in recent sessions, underpinned by:
– Persistent inflation that remains above the Fed’s 2 percent target.
– Robust labor market conditions with jobless claims remaining low.
– Mixed but generally positive retail sales and services sector activity.
– Safe-haven demand as geopolitical tensions fluctuate and global growth prospects remain uneven.
The combination of these factors has supported the greenback against major peers. With the FOMC minutes expected to offer further clues on policy direction, traders have become cautious, limiting aggressive bets in anticipation of new guidance.
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**EUR/USD: Struggling To Find Direction Above 1.0800**
The Euro has faced heavy pressure in recent weeks. The EUR/USD pair has slipped below 1.0850 and currently hovers just above the 1.0800 handle. Several fundamental and technical drivers are at play:
– **Eurozone Economic Data**: Growth has remained challenged, with inflation readings stabilizing but consumer confidence and industrial activity remain subdued.
– **Monetary Policy Divergence**: The European Central Bank (ECB) has signaled openness to rate cuts, contrasting the Fed’s ‘higher for longer’ stance, further weighing on the euro.
– **Technical Analysis**:
– The 1.0800 level serves as near-term support.
– Resistance presents itself at 1.0895 and 1.0940.
– Breaking below 1.0785 could accelerate downside momentum, opening a path toward the March 2023 lows.
Traders await clear signals from the FOMC minutes before making decisive moves. A hawkish interpretation could see further dollar upside, pushing EUR/USD lower.
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**GBP/USD: Pausing Before Potential Moves**
The British Pound has held up comparatively well relative to the euro, but it nonetheless faces its own headwinds. The GBP/USD pair trades near the 1.2700 region amid shifting policy rhetoric and cautious risk sentiment.
– **U.K. Economic and Policy Factors**:
– Recent data has been mixed but shows modest improvement, alleviating some recession fears.
– The Bank of England (BoE) remains alert to inflation pressures but has hinted at the possibility of cuts if data softens.
– **Technical Picture**:
– Support sits at the 50-day moving average near 1.2610.
– Resistance is close to the 1.2780 and 1.2820 levels.
– A break above 1.2820 could encourage a bullish move toward 1.2950.
Sterling traders are expected to remain cautious ahead of the FOMC minutes, with notable moves only likely once market participants digest the tone and content of the Fed’s latest discussion.
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**USD/CAD: Canadian Dollar Weakens Amid Soft Oil and U.S. Resilience**
The Canadian dollar has underperformed as both domestic and external headwinds worsen. The USD/CAD pair has advanced above the 1.3600 level as risk sentiment
Read more on GBP/USD trading.