EUR/USD and GBP/USD Price Forecast: Dollar Index Rises, Awaiting ECB Speech and U.S. Data

Highlights

• Dollar Index rises to 103.27, driven by mixed UK economic signals and weak US Empire State Manufacturing data.
• UK CPI shows 4.0% year-on-year, while PPI Input and Output drop, indicating mixed inflation and manufacturing costs.
• ECB President Lagarde’s speech, German bond auction, and US economic data releases are anticipated events affecting currency markets.

Dollar Strengthens Amid Mixed Economic Signals

In Wednesday’s early trading, the U.S. Dollar Index (DXY) is at approximately 103.27, an increase of 0.12%. This continues the pattern from January 16, when both the Euro and British Pound declined against the U.S. Dollar.

Recently released UK economic data shows the Consumer Price Index (CPI) year-on-year at 4.0%, higher than anticipated. Core CPI, which excludes volatile items, is up by 5.1%. However, the Producer Price Index (PPI) Input and Output both decreased, with PPI Input down by 1.2% month-on-month and PPI Output by 0.6%.

In Europe, Germany’s Final Consumer Price Index (CPI) met the 0.1% expectation. The German ZEW Economic Sentiment Index was 15.2, exceeding the 11.6 forecast. The Eurozone ZEW Economic Sentiment Index also outperformed expectations at 22.7.

In the U.S., the Empire State Manufacturing Index fell sharply to -43.7, significantly below forecasts. This decline has likely played a role in strengthening the U.S. dollar, as investors seek stability amid signs of economic challenges.

Events Ahead

Looking ahead, focus will be on the ECB President Lagarde’s speech and the UK housing price index data. The U.S. will see a range of data releases including retail sales, industrial production, and several FOMC member speeches.

US Dollar Index (DXY)

The U.S. Dollar Index is ascending, currently positioned at 103.060. It has surpassed the short-term average price line (50-period EMA) at 102.215 and the long-term exponential moving average situated at 102.111. Much of the bullish sentiment arose following the golden cross at the 102.050 level earlier this week. For now, the Dollar Index has the potential to pursue the 103.850 milestone.

EUR/USD Technical Forecast

The EUR/USD is trading lower at 1.08616, a 0.16% decrease from the previous close. On the 4-hour chart, the pair finds immediate resistance at $1.0924, with further barriers at $1.0956 and the psychological $1.1000 level.

Support levels are identified at $1.0838, followed by $1.0792 and $1.0742. The 50-day Exponential Moving Average (EMA) is at $1.0936, and the 200-day EMA is at $1.0918, both currently above the price, suggesting resistance on moves higher.

A breakout below the upward trendline at $1.0925 indicates a bearish sentiment. The overall trend appears bearish as long as the price remains below $1.0925. Short-term, the pair may test lower support levels if the current momentum continues.

GBP/USD Technical Forecast

The GBP/USD pair bounced off by 0.50% upon the release of stronger than expected UK CPI data. On a 4-hour chart, the pivot point stands at $1.2645, with resistance observed at $1.2673, $1.2722, and $1.2783.

Conversely, support appears at $1.2608, followed by $1.2571 and $1.2511. The 50-day Exponential Moving Average (EMA) hovers at $1.2700, while the 200-day EMA is at $1.2650, suggesting that any downward moves might be cushioned or capped by these levels.

The currency pair has breached a symmetrical triangle pattern at $1.2673, hinting at possible selling pressure, although the EMAs could provide some buoyancy. The trend is bullish above the pivot of $1.2645.