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EUR/USD and GBP/USD Price Forecast: Dollar Index Nears 61.8% Fibo Retracement – What’s Next?

By:
Arslan Ali
Published: Jan 22, 2024, 07:57 GMT+00:00

As the Dollar Index flirts with the key 61.8% Fibonacci level, global currency markets respond, setting the stage for potential shifts in EUR/USD and GBP/USD trends.

EUR USD

In this article:

Highlights

  • Dollar Index dips slightly, reacting to U.S. consumer sentiment drop and weaker German PPI data.
  • EUR/USD shows a modest rise, with critical resistance and support levels defining its short-term path.
  • GBP/USD gains momentum, underpinned by technical patterns indicating a potential upward trend.

Dollar Index Reacts to U.S. Consumer Sentiment Dip and German PPI Drop

The Dollar Index (DXY) dipped slightly to trade near 102.850 mark, having completed 61.8% Fibonacci retracement. This movement reflected the broader market’s reaction to the latest U.S. data, which included the Preliminary University of Michigan Consumer Sentiment Index falling short of expectations at 69.7, compared to the forecast of 78.8. Existing Home Sales also marginally missed the mark, coming in at 3.78M against the predicted 3.83M.

On Friday, the German Producer Price Index (PPI) recorded a more significant drop than anticipated, at -1.2% month-over-month, compared to a forecasted -0.4%. This data highlights concerns about the European Central Bank’s (ECB) cautious approach to growth and inflation.

The ECB minutes from their December meeting revealed a growing concern about economic outlook uncertainties and unanimous agreement on the complexity of inflation dynamics. In the UK, Retail Sales significantly underperformed, with a 3.2% month-over-month decrease, far exceeding the -0.5% expectation.

Events Ahead

Looking ahead, the Conference Board (CB) Leading Index, a significant measure of future economic activity, is expected to be released at 15:00. This index, forecasted to show a month-over-month change of -0.3% compared to the previous -0.5%, can potentially influence market sentiment.

US Dollar Index (DXY)

Dollar Index
Dollar Index

The Dollar Index (DXY) shows signs of bullish momentum, recently completing a 61.8% Fibonacci retracement at $102.799. The index faces immediate resistance at $102.691 and further resistance at $103.183. Conversely, support levels are observed at $102.500 and $102.315. The 50-day and 200-day Exponential Moving Averages, at $102.610 and $102.505 respectively, suggest a consolidating trend. The outlook remains bullish above the $102.799 mark.

EUR/USD Technical Forecast

EUR/USD Price Chart - Source: Tradingview
EUR/USD Price Chart – Source: Tradingview

The EUR/USD currency pair shows a modest rise, trading at 1.09053, up by 0.07%. Examining the 4-hour chart, we find the pivot point at $1.09099, critical for determining short-term market direction. Resistance levels are set at $1.09455, $1.09939, and $1.10383. Each of these could act as hurdles to further upward progression.

Conversely, the pair finds immediate support at $1.08452. Should the pair decline, subsequent support levels at $1.08006 and $1.07552 will be key to watch. The 50-day and 200-day Exponential Moving Averages, positioned around $1.09099 and $1.09122, are pivotal in shaping the pair’s momentum.

EUR/USD chart implies that a sustained move below $1.09099 could trigger a bearish momentum, steering the pair towards a potential downtrend.

GBP/USD Technical Forecast

GBP/USD Price Chart - Source: Tradingview
GBP/USD Price Chart – Source: Tradingview

The GBP/USD pair is currently trading at 1.27158, showing a modest increase of 0.10%. Technical analysis of the 4-hour chart indicates a key pivot point at $1.27200. If the pair maintains above this level, it could approach an immediate resistance at $1.27403. Further resistances are seen at $1.27829 and $1.28263.

Conversely, support levels are positioned at $1.26888, followed by $1.26662 and $1.26387. The 50-day and 200-day Exponential Moving Averages, at 1.26967 and 1.26548 respectively, highlight a potential bullish bias.

Notably, a ‘Three White Soldiers’ pattern has emerged, reinforcing the possibility of an upward trend. Overall, GBP/USD appears to be on a bullish trajectory, with a focus on surpassing the $1.27403 resistance in the near term.

About the Author

Arslan, a webinar speaker and derivatives analyst, has an MBA in Finance and MPhil in Behavioral Finance. He guides financial analysis, trading, and cryptocurrency forecasting. Expert in trading psychology and sentiment.

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