The forex market kicked off Tuesday with the U.S. dollar gaining strength, as investors remain focused on bond yields and a strengthening greenback.
Various currency pairs showed nuanced movements, signaling shifts in market sentiment. Here’s an overview of recent price action and technical insights across major pairs.
EUR/USD Technical Overview
The euro attempted an early rally on Tuesday, but momentum waned, leaving EUR/USD vulnerable. Traders have been watching the 1.08 support level, a significant mark on the charts, as buyers struggle to gain control.
This level forms a potential floor, ranging from 1.0750 to 1.0850, providing a buffer zone for the euro to find some stability.
EUR/USD’s move below both the 100-hour and 200-hour moving averages indicates a lack of conviction on the upside. Recent trading sessions saw the pair bouncing off these averages, only to return lower as sellers seized control.
The European session saw an initial breach above the 200-hour moving average, a move that quickly reversed, leading the pair back down. Current levels suggest the sellers are back in charge, with 1.0780 and 1.0776 as potential downside targets.
USD/JPY: Strength in Volatility
The U.S. dollar’s rally against the Japanese yen underscored the market’s focus on the carry trade, which benefits from the widening rate differential between the U.S. and Japan.
The USD/JPY pair briefly pulled back in the Asian session but continues to hover above 152, with the next resistance around 155 yen.
Notably, the market is awaiting economic data from the U.S., including job claims, along with Japan’s Bank of Japan rate decision on Thursday.
These factors could trigger additional volatility for the pair, which remains in a cautious upward trajectory. A breach of last week’s high at 153.18 would likely affirm the bullish outlook, but traders remain wary of any signals that could cause a retraction toward the 100-hour moving average.
AUD/USD Under Pressure
The Australian dollar finds itself under pressure, primarily due to the robust performance of the U.S. dollar rather than any inherent weakness in the Aussie.
Rising U.S. bond yields have cast a shadow over the AUD/USD, pushing the pair toward oversold territory. A minor bounce could be expected, though resistance at 0.6650, near the 200-day EMA, could limit gains.
If the U.S. dollar continues to climb, AUD/USD may continue to test lower levels, with 0.6450 emerging as a likely target for the near term. However, if the pair manages to break above 0.6650, a more substantial recovery could be in play.
GBP/USD Struggles for Momentum
The British pound has experienced a tug-of-war between buyers and sellers, with repeated attempts to breach the 200-hour moving average thwarted.
Tuesday’s European session saw a failed break above this level, reinforcing a lack of conviction in the pair. The 1.3000 level remains a critical resistance area for GBP/USD, and a move above this mark could open the path toward 1.3048.
If sellers maintain pressure, GBP/USD may retest the 100-hour moving average around 1.2967. As the Bank of England meeting approaches, market participants remain on edge, as policy developments could shape the pound’s trajectory.
USD/CHF and USD/CAD Maintain a Bullish Stance
The USD/CHF pair has shown resilience, pushing above its 100-day moving average of 0.8684 in the Asian session and nearing resistance around 0.8700. Traders should watch for any moves above this level, which could bolster the dollar’s bullish outlook against the Swiss franc.
In the Canadian dollar space, USD/CAD has maintained a narrow range, trading around 1.3888. Canada’s economic concerns and political uncertainty have contributed to a subdued Canadian dollar, while the U.S. dollar remains the currency of choice for investors. As the pair stays above key support levels, the path of least resistance points upward.
Looking Ahead
As the trading week unfolds, several key data points and policy decisions could impact currency dynamics, particularly the USD/JPY and AUD/USD pairs.
Traders are bracing for the Bank of Japan’s interest rate announcement on Thursday, along with U.S. job claims data that could further influence dollar strength. The U.S. dollar continues to benefit from rising bond yields, a trend likely to persist as long as the Federal Reserve maintains its hawkish stance.
For now, buyers of the U.S. dollar retain the upper hand across most pairs, with volatility on the horizon as traders prepare for economic updates and central bank guidance.
Also Read: Forex Market Insights: USD Maintains Edge as EUR and AUD Seek Support
Disclaimer: The information provided in this article is for general informational purposes only and does not constitute financial advice, investment advice, trading advice, or any other form of advice. The forex market is highly volatile and carries a high level of risk. Trading foreign exchange may not be suitable for all investors, as it can result in significant losses. Before making any trading decisions, individuals should carefully consider their financial situation, experience level, and risk tolerance. We recommend seeking advice from an independent financial advisor if needed. SMJ assumes no responsibility for any trading or financial losses incurred from following the content of this article.
