U.S. dollar Prospects – EUR/USD, GBP/USD, USD/JPY
- The US dollar has largely halted its rebound, consolidating around the 102.00 level in recent days.
- US interest rate expectations turned in a downbeat direction last week, with traders pricing in nearly 160 basis points for the year.
- Dovish bets on the Fed’s path could be scaled back if central bank officials begin to back down Wall StreetOutlook – a situation that could boost yields and the US dollar
Most read: USD at a critical juncture after US CPI, EUR/USD, USD/JPY, and GBP/USD settings
US interest rate expectations turned very cautious last week despite the surprise rise in core inflation numbers and December data. The chart below shows that traders are now discounting approximately 160 basis points of easing for 2024, 30 basis points higher than seven days ago. In this context, the US dollar (DXY) has halted its recovery, settling slightly above the 102.00 level since the beginning of the year.
Source: Trading View
Are you wondering about the technical and fundamental outlook for the US Dollar? Get clarity with our latest forecasts. Download your free copy now!
Recommended by Diego Coleman
Get your free forecast in USD
Although the US central bank is likely to lower borrowing costs later this year, the deep cuts in interest rates set by market participants appear extreme for an economy showing remarkable resilience and still experiencing above-target inflation. Given the current conditions, it would not be surprising to see traders pull back on their cautious bets soon, paving the way for a market reversal.
Looking ahead to next week, the US economic calendar is fairly light, with markets closed on Monday for the Martin Luther King Jr. holiday. However, several Fed officials will appear in public, so it is important to watch whether policymakers begin to buck Wall Street’s dovish outlook. If they do, yields and the US dollar could rise.
For a full analysis of euroOur medium-term forecasts, request a copy of our first-quarter forecasts!
Recommended by Diego Coleman
Get your free Euro forecast
Technical analysis of the EUR/USD pair
The EUR/USD pair fell modestly on Friday, but remained above the support level near 1.0930. If this technical bottom holds, prices are likely to resume their upward journey in the near term, in which case, we cannot rule out an advance towards 1.1020. Continued strength may redirect attention to 1.1075/1.1095, followed by 1.1140.
On the other hand, if the bearish momentum intensifies and pushes the exchange rate below 1.0930, the possibility of a bounce towards 1.0875 emerges – a key area where the 50-day SMA converges with the lower limit of a short-term upward channel. With further weakness, sellers may begin an attack on the 200-day SMA.
Technical chart of EUR/USD
EUR/USD chart prepared using TradingView
To get a comprehensive view of Japanese YenFor fundamental and technical forecasts, be sure to download our Q1 trading forecasts today. It’s completely free!
Recommended by Diego Coleman
Get your free Japanese Yen forecast
Technical analysis of the USD/JPY pair
The USD/JPY pair rose at the beginning of last week, but its upward momentum began to fade when the pair failed to clear the resistance level near 146.00, eventually pulling back towards support at 144.65. The Bulls must defend this floor at all costs; Failure to do so could expose the 200-day simple moving average at 143.60. Continuing losses from this point on could draw attention to the December lows below the 141.00 mark.
In case the bulls regain control of the market, technical resistance appears at 146.00, near the 50-day simple moving average. If history is a guide, the pair may be rejected from this area on a retest, but a successful breakout could pave the way for a rally towards 147.25, just below the 100-day SMA.
USD/JPY technical chart
USD/JPY chart created using TradingView
Interested in learning how retail positioning can provide clues about GBP/Short-term trend of the US dollar? Our feelings guide has all the answers you’re looking for. Get the free guide now!
|
change in |
Miss |
Shorts |
Amnesty International |
| Daily | 2% | 1% | 2% |
| weekly | 7% | 1% | 4% |
Technical analysis of GBP/USD
The GBP/USD pair was largely directionless on Friday, fluctuating around the general resistance at 1.2765. Sellers must vigorously protect this artistic ceiling; Failure to do so could result in a move higher towards the December high located above the 1.2800 level. With more strength, the bulls may gather confidence to launch an attack on the 1.3000 psychological threshold.
Conversely, if sellers regain the upper hand and trigger a sell-off, key support looms at 1.2675, which represents the lower bound of a medium-term upward channel that has been in operation since October. While the pound is likely to find stability in this area during the pullback, a breakdown could open the door to a decline towards 1.2600. Subsequent losses beyond this level may trigger a reaction with the 200-day simple moving average.
GBP/USD technical chart
GBP/USD chart prepared using TradingView