EUR/USD, GBP/USD, USD/CAD, USD/JPY Forecasts – U.S. Dollar Tests New Highs As PPI Exceeds Estimates

Key Insights

• U.S. Dollar Index scales heights as August PPI report registers a 0.7% MoM uptick, outpacing analysts’ +0.4% forecast.
• ECB hikes rates from 4.25% to 4.5%, but stops short of signaling a peak in the rate cycle.
• The British pound wilts not just due to the U.S. dollar’s strength, but also under the weight of a languid UK economy.

U.S. Dollar

U.S. Dollar Index gains ground as traders react to the PPI report, which showed that producer prices increased by 0.7% month-over-month in August, compared to analyst consensus of +0.4%. The better-than-expected Retail Sales report provided additional support to the American currency.

From the technical point of view, U.S. Dollar Index settled above the previous resistance at 104.45 – 104.70 and is moving towards the next resistance level, which is located at 105.65 – 105.90.

EUR/USD

EUR/USD tested new lows after ECB raised the interest rate from 4.25% to 4.5%, in line with the analyst consensus. ECB noted that it was too early to tell whether interest rates have peaked.

In case EUR/USD stays below the 1.0670 level, it will move towards the next support, which is located in the 1.0620 – 1.0650 range.

GBP/USD

GBP/USD moved lower as traders focused on the general strength of the U.S. dollar. The weakness of the UK economy serves as an additional bearish catalyst for GBP/USD.

If GBP/USD settles below the 1.2400 level, it will head towards the next support in the 1.2300 – 1.2330 range.

USD/CAD

USD/CAD remains under pressure as oil markets test new highs, which is bullish for the Canadian dollar.

A successful test of the support at 1.3500 – 1.3520 will open the way to the test of the next support level in the 1.3370 – 1.3400 range.

USD/JPY

USD/JPY pulls back despite rising Treasury yields. Traders are not ready to push USD/JPY above the resistance at 148.00 – 149.00.

A move below the 147.00 level will push USD/JPY towards the 146.00 level. Profit-taking may serve as an important catalyst for USD/JPY in the upcoming trading sessions as the pair is trading near multi-month highs.

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