USD Outlook – euro/usd, GBP/USD, USD/JPY
- The US dollar has largely stopped rebounding and has been consolidating around the 102.00 level in recent days.
- U.S. interest rate expectations took a dovish turn last week, with traders pricing in nearly 160 basis points of easing by the end of the year.
- Dovish bets on Fed policy could be scaled back if central bank officials start pushing back against the Fed. wall streetForecast – conditions that could push yields and the USD higher
Most read: US dollar, EUR/USD, USD/JPY, GBP/USD settings at critical stage after US CPI
Last week, US interest rate expectations turned significantly more dovish despite unexpected upside in headline and core inflation in December. The chart below shows that traders are currently discounting 2024 easing by about 160bp, 30bp higher than seven days ago. In this context, the US dollar (DXY) has stalled in its recovery and has been hovering just above the 102.00 level since the beginning of the year.
Source: TradingView
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The U.S. central bank is likely to lower borrowing costs later this year, but the deep rate cuts priced in by market participants seem extreme for an economy that has shown remarkable resilience and continues to see persistent inflation above target. It looks like. Given the current situation, it would not be surprising to see traders scale back dovish bets in the near term, paving the way for a market reversal.
Looking ahead to next week, the U.S. economic calendar looks much lighter as markets are closed on Monday for the Martin Luther King Jr. holiday. But with several Fed officials scheduled to make public appearances, it will be important to watch whether policymakers begin to push back on Wall Street's dovish outlook. If that happens, yields and the U.S. dollar could rise.
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EUR/USD technical analysis
EUR/USD fell slightly on Friday, but remained above support around 1.0930. If this technical floor holds, the price could resume its upward move in the short term, in which case we cannot rule out a move towards 1.1020. If the strength continues, attention could shift to 1.1075/1.1095 and then 1.1140.
Conversely, if bearish momentum strengthens and the exchange rate falls below 1.0930, a retracement towards 1.0875 becomes a possibility. This is a key area where the 50-day simple moving average converges with the lower bound of the short-term uptrend channel. If there is further weakness, sellers may start attacking the 200-day SMA.
EUR/USD technical chart
EUR/USD chart created using TradingView
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Technical analysis of USD/JPY
USD/JPY rebounded early last week, but its upward momentum began to wane when it failed to break through the resistance near 146.00, eventually leading to a pullback towards the support at 144.65. The bull must defend this floor at all costs. Otherwise, his 200 day simple moving average could be 143.60. If the decline continues from this point, the December lows below the 141.00 mark could become a focus.
If the bulls regain control of the market, technical resistance will appear right around the 50-day simple moving average at 146.00. If history is a guide, the pair could be rejected from the region on a retest, but a successful breakout could set it up for a rally towards 147.25, just below the 100-day simple moving average. There is a possibility that
USD/JPY technical chart
USD/JPY chart created using TradingView
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|
change |
long |
shorts |
OI |
| every day | 2% | 1% | 2% |
| weekly | 7% | 1% | Four% |
GBP/USD technical analysis
GBP/USD was largely directionless on Friday, fluctuating around the overhead resistance in the 1.2765 area. Sellers must adhere strictly to this technical cap. Otherwise, it could move towards a December peak above the 1.2800 level. Further strength may give the bulls the confidence to launch an attack towards the psychological threshold of 1.3000.
Conversely, if sellers regain the upper hand and trigger a selloff, the primary support is approaching 1.2675, which represents the lower bound of the medium-term uptrend channel since October. The cable could stabilize in this area during a pullback, but a breakdown could open the door for a decline towards 1.2600. Subsequent losses above this level could prompt an interaction with the 200-day SMA.
