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 | 13% | -9% | 4% |
Weekly | 13% | -20% | -2% |
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
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Unleashing the Bull: Exciting Opportunities on EUR/USD, USD/JPY, and USD/CAD
In the unpredictable world of the foreign exchange market, traders are always on the lookout for exciting opportunities to maximize their returns. Among the most popular and highly traded currency pairs are the EUR/USD, USD/JPY, and USD/CAD. These pairs, being major currencies, are the driving forces of the forex market and offer numerous opportunities for traders to capitalize on.
If you’re a trader looking to capitalize on the potential of these currency pairs, then read on as we unleash the bull and explore the exciting opportunities on EUR/USD, USD/JPY, and USD/CAD.
EUR/USD – The Most Traded Currency Pair in the World
The EUR/USD currency pair is often referred to as the “Euro Dollar” and is the most widely traded pair in the world. It represents the value of the Euro against the US dollar and is considered the benchmark for the forex market. The pair accounts for nearly 25% of all foreign exchange transactions and is highly favored by traders due to its liquidity and volatility.
One of the primary reasons for the popularity of EUR/USD is the significant economic data releases from both the Eurozone and the United States. These data releases, such as inflation, GDP, and employment figures, greatly influence the market sentiment and drive the pair’s price action.
For instance, during times of economic uncertainty, the US dollar is seen as a safe-haven currency and tends to appreciate against the Euro. Conversely, when the Eurozone’s economic outlook appears strong, the Euro gains strength against the US dollar. Traders must keep a close eye on these economic data releases to accurately gauge the direction of the EUR/USD pair.
USD/JPY – The Safe-Haven Pair in Times of Volatility
The USD/JPY currency pair is known as the “Gopher” and represents the US dollar against the Japanese yen. The pair accounts for nearly 15% of all forex transactions and is widely regarded as a safe-haven during periods of market volatility. As a result, the pair’s price action is not only driven by the economic data from Japan and the US but also by the market sentiment and risk appetite.
The Japanese yen is considered a low-yielding currency, making it a popular funding currency for carry trades. Carry trades involve borrowing in a low-yielding currency and investing in a high-yielding currency. When there is a sudden shift in market sentiment, riskier assets tend to sell off, causing traders to unwind their carry trades. This leads to an appreciation of the Japanese yen against other currencies, including the US dollar.
Therefore, traders must keep an eye on global economic and political events to understand the market sentiment and accurately predict the price action of the USD/JPY pair.
USD/CAD – The Oil-Linked Currency Pair
The USD/CAD currency pair represents the exchange rate between the US dollar and the Canadian dollar. Also known as the “Loonie,” the pair accounts for nearly 5% of all forex transactions. The Canadian dollar is often considered a commodity currency due to the country’s heavy reliance on its natural resources, primarily oil.
As a result, the price action of the USD/CAD pair is heavily influenced by movements in the oil market. When the oil prices rise, the Canadian dollar appreciates against the US dollar, and vice versa. Therefore, traders must keep a close eye on oil prices and global oil production levels to accurately predict the direction of the USD/CAD pair.
In addition to the oil market, traders must also monitor the economic data releases from both the United States and Canada to gauge the pair’s price action. Factors such as interest rate differentials, inflation, and GDP growth can significantly impact the USD/CAD pair.
Benefits and Practical Tips for Trading EUR/USD, USD/JPY, and USD/CAD
Trading these currency pairs can be extremely rewarding for traders, but without proper risk management and knowledge of market trends, it can also lead to significant losses. Here are some practical tips for trading EUR/USD, USD/JPY, and USD/CAD:
1. Stay Informed – Keep a watchful eye on economic data releases, geopolitical events, and central bank decisions to accurately analyze the market sentiment and predict the price action of the currency pairs.
2. Monitor Correlations – The USD/JPY pair tends to move in tandem with the US stock market, while the USD/CAD pair is highly correlated to the oil market. Keep track of these correlations to better understand market movements.
3. Use Technical Analysis – Utilize technical indicators and chart patterns to identify entry and exit points in the market. This can help reduce risk and increase profits.
Case Studies and First-hand Experience
Successful traders have made significant gains trading the EUR/USD, USD/JPY, and USD/CAD pairs. Case studies show that traders who accurately interpret market sentiment and combine it with technical analysis have seen substantial returns on their investments.
One trader, Sarah, shared her experience with trading USD/CAD. She closely monitored the oil market and noticed that prices were falling due to oversupply. She then analyzed the USD/CAD chart and noticed a clear downward trend. Following her analysis, she opened a short position on the pair, and as expected, it fell, resulting in a significant profit for her.
Conclusion
In conclusion, the EUR/USD, USD/JPY, and USD/CAD pairs offer exciting opportunities for traders to capitalize on the foreign exchange market. However, it is crucial to stay informed, keep an eye on market trends and use proper risk management techniques to succeed in trading these pairs. With the right knowledge and strategy, traders can unleash the bull and make the most of these major currency pairs.