US Dollar Forecast: EUR/USD, USD/JPY, USD/CAD & AUD/USD’s Path Tied to US PCE – DailyFX

US dollar forecast – EUR/USD, USD/JPY, USD/CAD, AUD/USD

• of USD It has rebounded recently, helped by a hawkish reassessment of Fed policy. compared to what was expected earlier this year
• outlook FOMC The start of reducing borrowing costs at the March meeting also tapered off, strengthening the US dollar's recovery
• All eyes will be on the US this week PCE report

Most read: US dollar forecast – EUR/USD, USD/CAD, AUD/USD. Where next?

The US dollar, as measured by the DXY index, has seen a remarkable recovery recently, supported by a strong recovery in US Treasury yields on the back of a hawkish reassessment of the Fed's monetary policy outlook.

For context, as recently as last Friday, Wall Street was expecting a rate cut of nearly 160 basis points this year, but those dovish expectations have since narrowed and the market now sees only 124 basis points of easing in the period of interest. It's discounted.

2024 Federal Funds Futures Contract (Implied Yield)

Source: TradingView

Expectations that the FOMC will begin lowering borrowing costs at its March meeting have also waned, with rates now at 46%, down from about 77% a week ago (January). There is no doubt that this situation has contributed to the USD's positive performance against its top peers.

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Source: CME Group

With above-trend growth in U.S. economic activity, an extremely tight labor market, and stagnant disinflationary growth, policymakers are unlikely to see any growth in 2024, especially if future data are inconsistent. It would not be surprising to see traders further reduce their bets on how much rates will fall.

In the coming days, the U.S. Bureau of Economic Analysis will release last month's personal income and spending numbers, which will provide more clarity on the economy and consumer prices. That said, traders should pay attention to two things in this report: consumer spending growth and core PCE.

The screen capture below is taken from DailyFX's Economic Calendar and shows the consensus forecast for upcoming releases.

Upcoming US data

sauce: DailyFX Economic Calendar

A better-than-consensus forecast could indicate that the U.S. economy remains weak and that it is too early to ease policy stance. This scenario could push US Treasury yields higher and strengthen a bullish reversal in the US dollar. On the other hand, if the numbers are suppressed, expectations for easing will be confirmed, and the dollar may return to a weaker trajectory.

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EUR/USD technical analysis

Although the EUR/USD pair slumped earlier in the week, it managed to stay above the 200-day simple moving average of 1.0840. It is important to keep this support zone intact to boost sentiment towards the euro. Otherwise, we could see a pullback towards 1.0770 followed by 1.0700.

On the other hand, if the buying momentum returns and causes a market reversal, the main resistance level will be located in the 1.0910 to 1.0930 band. Sellers are expected to vigorously defend this technical cap. However, a successful breakout could expose the 1.1020 area.

EUR/USD technical chart

EUR/USD chart created using TradingView

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Technical analysis of USD/JPY

USD/JPY rebounded at the beginning of the week, but as the weekend approached, the price failed to break through the resistance near 149.00, and the upward momentum weakened, resulting in a small retrace from that level. That said, if the losses widen in the coming days, support will appear at 147.40, followed by 146.00.

On the contrary, if the bulls regain control of the market and push the pair above 149.00, it could lead to a rally towards the psychological mark of 150.00. If past patterns serve as a guide, USD/JPY could be rejected from this area on a retest. However, a breakout could set the stage for a move towards 150.90.

USD/JPY technical chart

USD/JPY chart created using TradingView

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USD/CAD technical analysis

USD/CAD performed well at the beginning of the week, but fell sharply towards the end of the week, losing its 200-day simple moving average. This decline followed a failed attempt to overtake the trendline resistance and his key Fibonacci level around 1.3540.

If the bearish reversal gains momentum in the coming trading sessions, the first support is expected at 1.3385 and then 1.3355. On the other hand, if the bulls make a comeback and move the pair higher, resistance is found at 1.3480. Pay attention to 1.3510 for further strength.

USD/CAD technical chart

USD/CAD chart created using TradingView

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AUD/USD technical analysis

AUD/USD stalled in late December and early this week, but bounced back to technical support at 0.6525, allowing the price to break through the key ceiling in the 0.6570 to 0.6580 range. If the recovery gains momentum in the coming sessions, the first resistance level will be at 0.6650 and then 0.6700.

Conversely, if the sellers reappear and push the pair below 0.6580/0.6570, the next area likely to provide technical support will appear at 0.6525, which corresponds to the 100-day simple moving average. For further declines, the focus will be on the Fib retracement at 0.6500, which is 61.8% of the October/December rally.

AUD/USD technical chart

AUD/USD chart created using TradingView