EUR/USD, GBP/USD, USD/CAD, USD/JPY Forecasts – U.S. Dollar Tests Multi-Month Highs After ISM Services PMI Report

Key Insights

• EUR/USD pulled back below the 1.0750 level as Germany’s exports fell 4.6% in December. 
• GBP/USD settled below 1.2550 as traders focused on strong economic data from the U.S. 
• USD/CAD moved above the 1.3500 level as demand for commodity-related currencies declined. 

U.S. Dollar

U.S. Dollar Index tests new highs as traders prepare for a more hawkish Fed. The better-than-expected ISM Services PMI report provided additional support to the American currency. Recent data suggests that U.S. economy is stronger than previously expected, which is bullish for the U.S. dollar.

In case U.S. Dollar Index settles above the resistance at 104.35 – 105.55, it will move towards the next resistance level, which is located in the 105.75 – 106.00 range.

EUR/USD

EUR/USD pulls back as traders focus on weak Exports data from Germany. The country’s Exports declined by 4.6% month-over-month in December, compared to analyst consensus of -2%. The biggest EU economy remains under strong pressure, which is bearish for the European currency.

A move below the support at 1.0730 – 1.0750 will push EUR/USD towards the next support level at 1.0640 – 1.0660.

GBP/USD

GBP/USD gained downside momentum as traders focused on general strength of the American currency. Interestingly, the encouraging UK Services PMI report did not provide any support to the British pound.

The nearest support level for GBP/USD is located in the 1.2500 – 1.2520 range. A move below this level will open the way to the test of the next support at 1.2350 – 1.2380.

USD/CAD

USD/CAD tests new highs as traders focus on rising Treasury yields. The pullback in precious metals markets serves as an additional bearish catalyst for the Canadian dollar.

From the technical point of view, USD/CAD has recently moved above the resistance at 1.3480 – 1.3500 and is heading towards the next resistance level at 1.3600 – 1.3620.

USD/JPY

USD/JPY is moving higher amid a lack of positive catalysts for the Japanese yen. There are no signs indicating that BoJ is ready to make material changes to its ultra-dovish policy.

It remains to be seen whether BoJ is ready to defend the 150.00 level. Japan’s central bank may prefer to wait until USD/JPY crosses the 150.00 mark before intervening to provide support to the yen.

For a look at all of today’s economic events, check out our economic calendar.