Original article by James Stanley via Forex.com
Title: US Dollar Faces Crucial Test Ahead of NFP, CPI, and BOJ: EUR/USD, USD/JPY, GBP/USD, USD/CAD in Focus
The US dollar begins a pivotal week poised for volatility as a range of major economic events and central bank decisions loom. After slipping slightly from its recent highs, the greenback remains within a strong bullish trend that could either reassert itself with renewed momentum or face a deeper retracement if upcoming data disappoints. The major drivers include the US Nonfarm Payrolls (NFP) report, the US Consumer Price Index (CPI) data, and the Bank of Japan (BOJ) policy meeting.
Below is an in-depth look at the technical and fundamental setup for the US dollar and four major USD pairs: EUR/USD, USD/JPY, GBP/USD, and USD/CAD.
Fundamental Outlook for the US Dollar:
– After rallying for most of the year, the US dollar has paused to consolidate.
– A minor pullback followed dovish commentary from the Federal Reserve and softer-than-expected US economic data.
– The upcoming NFP and CPI readings are expected to inject significant volatility depending on results.
– Labor market strength has underpinned Fed messaging, so any cracks in employment numbers may shift interest rate expectations.
– The headline CPI print will also influence Fed sentiment, especially if inflation remains sticky or rises unexpectedly.
The current market consensus expects US economic resilience to support a fairly hawkish monetary policy outlook. However, any surprises from labor or inflation readings could recalibrate rate forecasts and impact dollar positioning across the board.
US DOLLAR INDEX (DXY) TECHNICAL OUTLOOK
– The US Dollar Index recently reached a fresh yearly high at 106.52 but has since pulled back below the key 106.00 level.
– A bullish trend remains intact on the daily timeframe, showing a rising wedge formation.
– Key resistance sits at 106.52, while support can be found around 105.00 and then at 104.50.
Despite the recent pullback, price remains within a bullish structure, suggesting the potential for an upside breakout continuation if key data supports the greenback.
EUR/USD TECHNICAL ANALYSIS AND OUTLOOK
– The EUR/USD pair continues to operate in a bearish environment below key resistance zones.
– The pair was rejected at a descending trendline and horizontal resistance around the 1.0880 area.
– A recent breakdown below 1.0800 has opened the door toward 1.0700 and 1.0650 support levels.
– Near-term resistance is now located at the prior support-turned-resistance around 1.0800, followed by 1.0880.
The euro remains under pressure as the European Central Bank leans more dovish in contrast to the Fed. The technical picture continues to favor the downside unless US data misses by a wide margin.
Key EUR/USD levels to monitor:
– Resistance: 1.0800, 1.0880, 1.0930
– Support: 1.0700, 1.0650, 1.0600
USD/JPY TECHNICAL ANALYSIS AND INTERVENTION RISKS
– The Japanese yen remains one of the weakest major currencies in the FX market this year.
– USD/JPY set a fresh 34-year high above 160.00 before a sharp pullback sparked by suspected BOJ or Ministry of Finance (MOF) intervention.
– The yen rebounded aggressively in recent sessions, dragging USD/JPY back toward the mid-150 zone.
– The 155.00 area is a key resistance pivot, while 152.00 offers near-term support. A break below 150.00 could signal further retracement.
Traders need to be cautious around BOJ commentary and any potential intervention to support the yen. With the BOJ meeting this week, the
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