US Dollar Forecast: CPI Data May Drive Gains – Gold, GBP/USD, and EUR/USD Outlook

USD Gains to 101.7; Gold Steady at $2,695 Ahead of CPI Data

The US Dollar remains steady, buoyed by stronger-than-expected NFIB Small Business Index data at 101.7, surpassing the forecast of 94.6. Revised Nonfarm Productivity met expectations at 2.2%, while Unit Labor Costs came in at 0.8%, indicating easing wage pressures. Gold prices hold near $2,695 as traders await key CPI data due on Wednesday.

Core CPI is forecast at 0.3%, with annual inflation expected to rise slightly to 2.7%. These reports will likely influence the Federal Reserve’s policy outlook, shaping the short-term trajectory for both the US Dollar and gold. Treasury yields and geopolitical risks remain critical factors for market sentiment.

US Dollar Index (DXY) – Technical Analysis

The Dollar Index (DXY) is trading at $106.45, up 0.08%, holding firm above its pivot point at $106.28. This level is supported by the 50 EMA at $106.21, reinforcing bullish momentum.

The index’s symmetrical triangle pattern breakout hints at a potential uptrend, with immediate resistance at $106.72 and a higher target at $107.19 if buying momentum persists.

On the downside, immediate support lies at $105.79, followed by $105.42. A break below $106.28 could shift sentiment bearish, exposing these lower levels. The 200 EMA at $106.14 adds additional support, indicating strong technical backing for continued gains.

Gold – Technical Analysis

Gold (XAU/USD) is trading at $2,695.42, up 0.06%, maintaining its upward channel on the 4-hour chart. Immediate support is $2,675.91, with resistance at $2,704.15 and $2,721.38.

The 50 EMA at $2,665.02 reinforces bullish momentum, while a break below $2,675.91 could shift sentiment, targeting $2,657.31 or $2,635.50. The 200 EMA at $2,652.71 provides key support.

GBP Awaits 10-Year Bond Auction Yield at 4.48%

Sterling (GBP) traded steady on Tuesday with no significant economic releases. Focus shifts to Wednesday’s 10-year bond auction, expected at 4.48%. This could impact GBP performance, especially amid market anticipation of yield trends influencing broader investor sentiment. Watch for movements tied to auction results.

GBP/USD Technical Analysis

The GBP/USD pair is trading at $1.27536, down 0.14%, reflecting a cautious tone as traders assess its position relative to the pivotal $1.27335 level. This level aligns with an upward trendline and is bolstered by the 50 EMA at $1.27456, suggesting strong technical support.

Immediate resistance is located at $1.27996, with a higher target at $1.28415 if bullish momentum builds.

Conversely, a break below $1.27335 could signal a bearish shift, exposing the pair to declines toward support levels at $1.26927 and $1.26501. The 200 EMA at $1.27184 reinforces the importance of $1.27335 as a tipping point.

EUR Awaits Key ECB Policy Decisions After Mixed Data

The Euro (EUR) remained stable on Tuesday following German Final CPI data at -0.2% and Italian industrial production flat at 0.0%. While no major events are scheduled today, significant developments are expected tomorrow, including the Italian quarterly unemployment rate forecasted at 6.6% and the ECB’s monetary policy updates, with the refinancing rate projected at 3.15%. These events could drive volatility, particularly during the ECB press conference at 2:45 PM.

EUR/USD Technical Forecast

The EUR/USD pair is trading at $1.05137, down 0.12%, reflecting a cautious market tone as it holds just below the key pivot level of $1.05370. Immediate resistance is set at $1.05677, with further upside targets at $1.05945.

However, the pair remains under bearish pressure as long as prices stay below $1.05370, signaling a potential continuation of the downward trend.

Support levels at $1.04988 and $1.04597 are key to watch, especially if a break below the pivot occurs. The 50 EMA at $1.05416 and the 200 EMA at $1.05580 highlight the importance of the $1.05370 threshold.