US Dollar Forecast: DXY Dips to $104, Awaits Fed Speeches & Trade Balance Data

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Published: Feb 7, 2024, 07:52 GMT+00:00

With the Dollar Index's slight retreat and key EUR/USD, GBP/USD resistance levels in play, traders eye Fed remarks and trade balance data for cues.

US Dollar Forecast: DXY Dips to $104, Awaits Fed Speeches & Trade Balance Data

Highlights

Dollar Index retreats slightly, shedding 0.10% amidst a flurry of global economic updates.
EUR/USD and GBP/USD show modest gains, facing key resistance levels in the latest market dynamics.
Anticipated US Trade Balance and remarks from FOMC members could pivot currency market trends.

Economic Indicators Weigh on Currencies

The Dollar Index has seen a modest decline, trading at $104.037, down by approximately 0.10%. In Europe, German Industrial Production unexpectedly contracted by 1.6%, a sharper decline than the forecasted 0.4% decrease. This follows a surprising surge in German Factory Orders by 8.9% and a dip in Retail Sales by 1.1%.

For the GBP, the Halifax HPI showed a stronger than expected growth of 1.3%, suggesting resilience in the UK housing market. However, the Construction PMI indicated contraction at 48.8, signaling pressures in the construction sector.

Events Ahead

Looking ahead, the market anticipates the US Trade Balance, with expectations set for a deficit of $62.0 billion. Remarks from FOMC members Kugler, Barkin, and Bowman, alongside the 10-year Bond Auction and Consumer Credit data, will provide further cues on the Federal Reserve’s policy direction.

In Europe, French Prelim Private Payrolls and the Trade Balance, along with Italian Retail Sales, will offer insights into the Eurozone’s economic health.

For the UK, MPC Member Breeden’s speech at the Women in Economics Annual Event in London is awaited for potential impacts on GBP dynamics.

US Dollar Index (DXY)

Dollar Index

The Dollar Index slightly retreats, marking a 0.10% decrease to 104.057, as it navigates through key technical territories. The pivot point, established at 104.211, serves as a crucial threshold for the index’s direction, with immediate resistance levels poised at 104.610, 104.853, and 105.110, challenging its upward trajectory.

On the downside, support levels are strategically placed at 103.959 (38.2% Fibonacci retracement), 103.761 (50% Fibonacci retracement), and 103.563 (61.8% Fibonacci retracement), offering potential rebound points.

The 50-day and 200-day Exponential Moving Averages, at 103.793 and 103.280 respectively, hint at a bearish sentiment below the pivot, suggesting cautiousness in the index’s short-term movement.

EUR/USD Technical Forecast

EUR/USD Price Chart – Source: Tradingview

EUR/USD edges higher, gaining 0.15% to trade at 1.07687, amid fluctuating market dynamics. The pair navigates through key Fibonacci retracement levels, finding immediate resistance at 1.07891 (38.2%), with subsequent barriers at 1.08097 (50%) and 1.08297 (61.8%).

Support lies at 1.07364, extending to 1.07115 and 1.06934, marking crucial thresholds for potential pullbacks. The 50-day and 200-day Exponential Moving Averages, at 1.08047 and 1.08661 respectively, provide a broader perspective on market sentiment.

Positioned above the pivot point of 1.07645, EUR/USD exhibits a bullish stance, contingent on sustaining this level, signaling potential upward momentum in the near term.

GBP/USD Technical Forecast

GBP/USD Price Chart – Source: Tradingview

GBP/USD sees a modest uptick, rising 0.18% to 1.26181, as it approaches key technical milestones. The currency pair faces immediate resistance at Fibonacci levels: 1.2644 (38.2%), 1.26743 (50%), and 1.27215 (61.8%).

Support is found at 1.25772, with further cushions at 1.25171 and 1.24780, which could play pivotal roles during pullbacks. The 50-day and 200-day Exponential Moving Averages, at 1.26446 and 1.26621 respectively, hover near resistance levels, suggesting a taut balance between bullish and bearish forces.

Positioned above the pivot point of 1.26144, GBP/USD’s trajectory appears cautiously optimistic, indicating potential for further gains if it maintains above this threshold.

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

About the Author

Arslan Aliauthor

Arslan is a finance MBA and also holds an MPhil degree in behavioral finance. An expert in financial analysis and investor psychology, Arslan uses his academic background to bring valuable insights about market sentiment and whether instruments are likely to be overbought or oversold.

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