US dollar forecast – EUR/USD, GBP/USD, USD/JPY
- of USD Rise accelerates as US Treasury yields rebound further after poor performance in second half of 2023
- All eyes will be on ISM manufacturing statistics and US non-farm employment statistics to be released later this week.
- In this article, we will focus on the outlook for the US dollar and analyze the price movements of the following key pairs: euro/usd, GBP/USD and USD/JPY We have a big impact event coming up later in the week.
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Most read: USD Q1 Fundamental Outlook: A Tale of Two Halves – Weak Start, Strong End
The US dollar, as measured by the DXY index, started the new year on a strong note, rising for the third straight session, supported by a recovery in US Treasury yields, with the 10-year Treasury note up 7 basis points to 3.93%. In this context, the DXY index rose 0.7% to 102.10 in early afternoon trading in New York, marking its biggest single-day gain since October ahead of a potentially impactful event later in the week. .
Key releases such as the ISM Manufacturing Survey and the U.S. Non-Farm Payrolls Report will provide an opportunity to assess the economic outlook and see if aggressive rate cut predictions for 2024 are justified. . As a frame of reference, traders are currently discounting easing over the next 12 months by 142 basis points, as shown in the chart below.
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2024 Federal Funds Futures (Monthly Contract Implied Rate)
Source: TradingView
If manufacturing activity picks up in a meaningful way and job growth shows unexpected upside, investors are likely to refrain from betting on deep interest rate cuts, and the Federal Reserve will be more confident that the economy will rekindle. We expect that they will be afraid to significantly reduce borrowing costs in a stable economy. inflation. This scenario would be bullish for the US dollar.
Conversely, if the statistics are disappointing and show cracks in the economy, particularly in the labor market, it would not be surprising to see the Fed's policy outlook shift in a more dovish direction; This will put downward pressure on yields and yields. , and by extension, the US dollar. His NFP output of less than 100,000 is likely to produce this response.
The figure below shows the consensus predictions for ISM and NFP.
Upcoming US economic data
sauce: DailyFX Economic Calendar
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EUR/USD technical analysis
EUR/USD rebounded to multi-month highs in late December, but failed to clear channel resistance around 1.1140 and fell towards 1.0935 on Tuesday. The pair is likely to bottom in this area before initiating the next up leg, but a breakdown would quickly develop a move towards channel support and the 200-day simple moving average around 1.0840. there's a possibility that.
Conversely, if the bulls regain decisive control of the market and cause a reversal, the first line of defense against future upside lies at 1.1020, followed by 1.1075/1.1095. Sellers must protect this band at all costs. If it fails to do so, it could move higher towards the channel resistance, which is currently above 1.1170.
EUR/USD technical chart
EUR/USD chart created using TradingView
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GBP/USD technical analysis
GBP/USD also sold off in the first trading session of 2024, falling below 1.2675 with several swing lows pushing towards confluence support around the 1.2600 handle, which coincides with the lower bound of the short-term uptrend channel. It is crucial that this technical floor holds in the coming days as a breakdown could trigger a decline towards the 200-day simple moving average.
In contrast, if selling pressure subsides and cable prices rise, resistance approaches 1.2675 and then 1.2765. If it strengthens further, the focus will shift to last month's peak around 1.2830. Overcoming this hurdle will be a formidable challenge for the bulls, but a breakthrough could pave the way for a possible rally towards the psychological 1.3000 level.
GBP/USD technical chart
GBP/USD chart created using TradingView
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|
change |
long |
shorts |
OI |
| every day | Ten% | 11% | 11% |
| weekly | 3% | -Five% | -2% |
Technical analysis of USD/JPY
USD/JPY rebounded from support on Tuesday, but was unable to reclaim the 200-day simple moving average. If the pair stays below this indicator for too long, sellers may reload and make a comeback, preparing for a fall below 140.95, but further losses may await below this threshold. The next area of interest is 139.85. .
On the other hand, if the bulls are able to push the exchange rate above the 200-day SMA around 143.00, it could move higher towards 144.80. This obstacle may be difficult to overcome, but if it can be successfully overcome, favorable conditions could be established for a rise towards the 146.00 handle. If the strength continues, the bulls may be emboldened to aim for 147.20.
