Most Read: USD/JPY Gains on Hot US PPI but FX Intervention Chatter May Cap Upside
Earlier this year, the market consensus indicated the Federal Reserve would deliver about 160 basis points of easing in 2024. However, these dovish expectations have been dialed back this month following stronger-than-forecast U.S. jobs growth and sticky inflation data, with traders now anticipating only 80 basis points of rate cuts for the year.
The recent repricing of the Fed’s policy outlook has boosted the U.S. dollar across the board, propelling the DXY index up by about 1.8% in the last three weeks. While gains may not unfold linearly going forward, there appears to be room for further upside, especially if incoming information confirms that progress on disinflation is faltering.
Looking ahead to the coming week, the spotlight will be on two key events: the FOMC minutes and the release of the S&P Global PMIs for February. The former could provide illuminating details on discussions surrounding the start of the easing cycle, while the latter stands to offer valuable insights into the current state of the U.S. economy.
Source: DailyFX Economic Calendar
Leaving fundamental analysis aside for now, in the next part of this article we’ll delve into the technical outlook for the three major U.S. dollar pairs: EUR/USD, USD/JPY and USD/CAD. Here we will examine the significant price thresholds that every forex trader should have on their radar in the upcoming sessions.
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EUR/USD FORECAST – TECHNICAL ANALYSIS
EUR/USD edged up on Friday after bouncing off technical support near the 1.0700 handle earlier in the week. If gains accelerate in the coming days, confluence resistance around 1.0800 will act as the first line of defense against further advances. Beyond this point, attention will be on the 200-day simple moving average at 1.0825, followed by the 50-day simple moving average at 1.0890.
Conversely, if sellers stage a comeback and trigger a bearish reversal, support emerges at 1.0700, as previously indicated. Bulls will need to vigorously defend this region; failure to do so could lead to a downward move towards 1.0650. Prices are likely to stabilize in this area during a pullback, but a decisive breakdown could prompt a drop 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 gained ground on Friday, consolidating its position above the 150.00 handle, yet unable to surpass the high achieved earlier in the week. Despite the pair’s upward trend, the exchange rate is nearing levels that could prompt Tokyo to increase verbal intervention or contemplate actions to bolster the yen. This may cap the U.S. dollar’s upside or trigger a reversal in the near term.
Discussing potential outcomes, if USD/JPY loses upward momentum and shifts downward, support is seen at 150.00, followed by 148.90. On further weakness, all eyes will be on 147.40. On the other hand, if USD/JPY defies expectations and continues its climb, resistance looms at 150.85. Further progression to the upside might bring last year’s peak near 152.00 into view.
USD/JPY TECHNICAL CHART
USD/JPY Chart Created Using TradingView
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| Change in | Longs | Shorts | OI |
| Daily | -3% | -6% | -5% |
| Weekly | 24% | -17% | -4% |
USD/CAD FORECAST - TECHNICAL ANALYSIS
Following a rebound from trendline support, USD/CAD pushed higher on Friday, closing above its 200-day simple moving average – a positive signal for price action. Should the pair build upon its recent gains over the coming days, resistance can be spotted at 1.3545, followed by 1.3585. Beyond this ceiling, bulls will have their sights on 1.3620 – the 61.8% Fib retracement of the November/December slump.
On the flip side, if sellers return and spark a move lower, technical support stretches from 1.3480 to 1.3460. Breaching this technical floor will be a tough task for the bears, but in the event of a breakdown, a rapid descent towards 1.3415 could be around the corner. From here onwards, additional losses could bring 1.3380 into sharper focus.
USD/CAD TECHNICAL CHART
