Most read: USD/JPY rose on strong US PPI, but talk of foreign exchange intervention may limit upside
Earlier this year, market consensus suggested the Fed would implement about 160 basis points of easing in 2024. But those dovish expectations have waned this month on the back of better-than-expected U.S. job growth and solid inflation data, with traders now expecting only an 80 basis point rate cut this year.
The Fed’s recent review of its policy outlook has led to an overall rally in the US dollar, with the DXY index up about 1.8% over the past three weeks. Although the rise may not develop in a straight line going forward, there appears to be room for further gains, especially if new information confirms that progress in easing inflation has stalled.
Looking ahead to next week, two important events will be in the spotlight: the FOMC meeting minutes and the release of the February S&P Global PMIs. The former could provide enlightening details about the debate surrounding the start of an easing cycle, and the latter could provide valuable insight into the current state of the U.S. economy.
sauce: DailyFX Economic Calendar
Putting fundamental analysis aside for now, in the next part of this article we will delve into the technical outlook for the three major US dollar pairs: EUR/USD, USD/JPY and USD/CAD. Here we consider important price thresholds that every Forex trader should keep an eye on in the upcoming session.
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EUR/USD Forecast – Technical Analysis
EUR/USD rose slightly on Friday after rebounding from technical support around the 1.0700 handle earlier in the week. If the rally accelerates in the coming days, the confluence resistance near 1.0800 will act as the first line of defense against further upside. Beyond this point, the 200-day simple moving average of 1.0825 will be of interest, followed by the 50-day simple moving average of 1.0890.
Conversely, if the sellers stage a comeback and cause a bearish reversal, support will appear at 1.0700, as mentioned above. The bulls will need to vigorously defend this area. Otherwise, it could fall towards 1.0650. Prices are likely to stabilize in this region during the pullback, but a decisive decline could prompt a decline towards 1.0520.
EUR/USD Chart – Technical Analysis
EUR/USD chart created using TradingView
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USD/JPY Forecast – Technical Analysis
USD/JPY rose on Friday, consolidating its position above the 150.00 handle, but was unable to surpass the highs achieved earlier in the week. Despite the yen’s upward trend, the exchange rate is nearing a level where the Japanese government may increase verbal intervention or consider action to strengthen the yen. This could cap the dollar’s upside or even trigger a reversal in the near term.
Discussing the potential outcomes, if USD/JPY loses its upward momentum and turns downward, support is seen at 150.00 and then 148.90. If it weakens further, all eyes will be on 147.40. On the other hand, if USD/JPY continues to rise against expectations, resistance will approach 150.85. If the price continues to rise further, last year’s peak around 152.00 may come into view.
USD/JPY technical chart
USD/JPY chart created using TradingView
Dive deeper into how crowd psychology can affect Forex market dynamics. To understand the role of retail positioning in forecasting USD/, request a sentiment analysis guide.CADshort-term direction.
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change |
long |
shorts |
OI |
| every day | 13% | -9% | Four% |
| weekly | 13% | -20% | -2% |
USD/CAD Forecast – Technical Analysis
Following a bounce from trendline support, USD/CAD rose on Friday to close above the 200-day simple moving average, which is a positive signal for price movement. If the pair further consolidates its recent gains in the coming days, resistance could lie at 1.3545 and then 1.3585. Above this ceiling, bulls will set their sights on the 61.8% Fib retracement of the November-December recession at 1.3620.
Conversely, if the sellers come back and turn down, the technical support will extend from 1.3480 to 1.3460. Breaking this technical floor will be a difficult task for the bears, but a breakdown could result in a rapid fall towards 1.3415. Going forward, further losses are likely to focus more on 1.3380.
