The path of EUR/USD, USD/JPY, USD/CAD, and AUD/USD is linked to US personal consumption expenditures.

US Dollar Forecast – EUR/USD, USD/JPY, USD/CAD, AUD/USD

• the U.S. dollar Interest rates have rebounded recently, supported by the Fed’s hawkish repricing of the course Compared to what was expected earlier in the year
• Prospect Federal Open Market Committee The start of lowering borrowing costs at the March meeting also faded, boosting the greenback’s recovery
• This week, all eyes will be on the United States Personal consumption expenditures a report

Most read: US Dollar Forecast – EUR/USD, USD/CAD, AUD/USD. Where’s next?

The US dollar, as measured by the DXY index, has seen a notable turnaround recently, supported by a significant rebound in US Treasury yields on the back of a tightening repricing of the Federal Reserve’s monetary policy outlook.

To provide context, Wall Street last Friday expected roughly 160 basis points of interest rate cuts for this year, but those dovish expectations have since been scaled back, with markets now discounting just 124 basis points of easing over the period.

2024 Fed Funds Futures (Implied Returns)

Source: Trading View

The odds that the FOMC will start cutting borrowing costs at its March meeting have also diminished, falling from approximately 77% one week ago (January) to 46% today. This situation has undoubtedly contributed to the positive performance of the dollar against major currencies.

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Source: CME Group

With US economic activity growing above trend, the labor market extremely tight and progress on fighting inflation stalling, it would not be surprising to see traders reduce their bets on how much policymakers will cut interest rates in 2024, especially if incoming data does not cooperate.

We will have more clarity on the economy and consumer prices in the coming days when the US Bureau of Economic Analysis reveals personal income and expenditure figures for last month. However, traders should pay attention to two things in the report: consumer spending growth and core personal consumption expenditures.

The screenshot below, sourced from the DailyFX Economic Calendar, shows the consensus estimates for the upcoming release.

Upcoming US data

source: DailyFX Economic Calendar

Any results higher than consensus estimates could indicate that the US economy is still active and that it would be too early to ease policy stance. This scenario could lead to higher Treasury yields, enhancing a bullish reversal for the US dollar. Conversely, weak numbers could confirm easing expectations, putting the US currency back on a declining path.

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Technical analysis of the EUR/USD pair

The EUR/USD pair pulled back earlier in the week but managed to hold above its 200-day simple moving average at 1.0840. To strengthen sentiment towards the Euro, it is crucial that this support area remains intact; Failure to do so could lead to a pullback towards 1.0770, followed by 1.0700.

On the flip side, if buying momentum returns and results in a market turnaround, key resistance is in the 1.0910-1.0930 range. Sellers are expected to strongly defend this technical ceiling; However, a successful breakout may expose the 1.1020 area.

Technical chart of EUR/USD

EUR/USD chart prepared using TradingView

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Technical analysis of the USD/JPY pair

The USD/JPY pair rose earlier in the week, but its upward momentum diminished heading into the weekend when prices failed to clear resistance near 149.00, triggering a modest bounce from those levels. However, if losses intensify in the coming days, support will emerge at 147.40, followed by 146.00.

On the other hand, if the bulls regain control of the market and push the pair above 149.00, there is a possibility of a rise towards the psychological level of 150.00. If historical patterns are a guide, USD/JPY may be rejected from this area on a retest; However, a breakout may pave the way for a move towards 150.90.

USD/JPY technical chart

USD/JPY chart created using TradingView

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Technical analysis of the USD/CAD pair

The USD/CAD pair showed a strong performance at the beginning of the week but took a sharp turn to the downside, losing its 200-day simple moving average heading into the weekend. This pullback came after a failed attempt to break the trend line resistance and the key Fibonacci level near 1.3540.

If the bearish reversal gains momentum in the coming trading sessions, initial support is expected to be at 1.3385, followed by 1.3355. On the other hand, if the bulls come back and push the pair higher, resistance will appear at 1.3480. With more strength, focus will be on 1.3510.

Technical chart of the USD/CAD pair

USD/CAD chart created using TradingView

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Technical analysis of AUD/USD

The AUD/USD pair lost ground from late December until early this week, but bounced off the technical support at 0.6525, allowing prices to break through the key ceiling of 0.6570 to 0.6580. If the recovery gains strength in the coming sessions, initial resistance lies at 0.6650, followed by 0.6700.

Conversely, if sellers re-emerge and push the pair below 0.6580/0.6570, the next area potentially offering technical support appears at 0.6525, which corresponds to the 100-day simple moving average. In case of further weakness, focus will be on 0.6500, which is the 61.8% Fib retracement level of the October/December high.

AUD/USD technical chart

AUD/USD chart created using TradingView