US Dollar Price Forecast: DXY Dips on Durable Goods – GBP/USD and EUR/USD to Rally?

Market Overview

The U.S. Dollar Index (DXY) is hovering around the 99.25-99.33 mark, showing some softening mid-day after taking a bit of a boost recently on safe-haven demand. The dollar is still getting a bit of a leg up from the ongoing US Iran conflict, which has pushed up oil prices and left people thinking that the Federal Reserve is going to tread carefully.

The higher fuel costs are stoking concerns about inflation, which in turn is making people think the Fed isn’t going to slash interest rates anytime soon. At the same time, though, news of possible diplomatic moves to ease tensions has slightly dialled back on people’s worries about risk, which has prompted some traders to cash out on the dollar.

Yesterday’s Market Drivers: The Geopolitics and Policy Landscape

On Tuesday the dollar saw a pretty healthy bounce as investors got a bit spooked by the heightened uncertainty in the Middle East and the soaring price of crude oil. The upward tick in yields and the Fed’s more hawkish stance also gave the greenback a bit of a boost.

Meanwhile, the euro was getting pretty battered near 1.1600 because of the inflation worries in the Eurozone linked to energy costs and the pound was holding steady at around 1.3410, as people think the Bank of England might not actually cut interest rates anytime soon thanks to the ongoing inflation worries.

All told, the currency markets were playing it pretty cautiously with safe-haven flows looking to the dollar, even with some pretty mixed US economic data.

Today’s Economic Outlook: What the Numbers are Saying Compared to Last Time

Looking ahead, traders are keeping an eye on a slew of big US economic releases, not least of which is Durable Goods Orders which is due to rise by 1.3% compared to the previous decline of –6.2%. A strong data release could give the Fed even more reason to be cautious with interest rates and a supporting hand to the dollar.

Over in Europe, it’s all about the inflation and growth indicators, while the UK data releases might have some bearing on people’s expectations about what the Bank of England is going to do next. It’s going to be a pretty headline-driven day, with geopolitics and economic data continuing to drive currency volatility for the rest of the day.

US Dollar Index (DXY) – Consolidates Near 99.30 as Trendline Support Holds

The Dollar Index (DXY) index is currently trading around $99.27 on the 2-hour chart, where it’s being held back by trendline support down at about $98.89. Had a bit of a run up to $100.15, but the price got knocked right back down, leaving us with those big, long upper wicks that tell us there’s still a lot of selling going on. The 50-period moving average – not far above at $99.45 is now acting as a bit of a snag for the price, while the 200-period one at $99.00 is still providing a base of support.

As far as our horizontal levels go, we’ve got $98.89 and $98.59 as our supports, and $99.80 and $100.15 as the places we’re looking to stall. So if we do manage to break through $99.80, we might see the price start to head up towards $100.15. But if instead it gets knocked back below $98.89 then all of a sudden we’ve got the price possibly heading on down to $98.23.

Trade idea: A bit of a buy set-up if we get a bounce above $99.80 and we’re looking to take it all the way to $100.15. When it comes to our stop, that’s going to be below $99.20.

GBP/USD Technical Analysis: Tests Descending Trendline as Bulls Attempt Recovery

GBP/USD is currently sitting at $1.3417 on the 4hr chart with price steady heading towards a descending trendline that has been the ceiling on rallies since the early days of February – this line has consistently kept price from making any major gains. Price is still sitting below the 200 period moving average at $1.35 where its been holding steady and the 50 period moving average near $1.3350 has been key support level lately.

The last few candles show higher lows from $1.32 – we might be starting to see some signs of a slow but steady bounce out of that bigger bearish picture. We’re still looking at key resistance levels at $1.3450 and $1.3575, with support levels below at $1.3350 and $1.3292. A decisive break above $1.3450 has to happen before we can see this market push on towards $1.3575, however, if we get a rejection then a retest of $1.3350 is on the cards

Trade idea: If price does manage to break above $1.3450 you could look to go long aiming for $1.3575 – but have a stop loss below $1.3350 ready

EUR/USD Technical Forecast:  Breaks Trendline Resistance, Eyes Upside Toward $1.1637

The EUR/USD is currently hovering around $1.1605 on the 2-hour chart following a breakout past a descending trendline and reclaiming that key support level at $1.1576. The price has now started to test the resistance level around $1.1637, although the 200-period moving average above continues to stand in the way of a bigger push upwards. Meanwhile the 50-period moving average near $1.1575 is acting as a dynamic pivot point – basically providing support

That’s thanks to a sharp bounce back up from the $1.1486 level, where a sequence of higher highs & higher lows has formed. Right now the immediate support levels to keep an eye on are $1.1576 & $1.1533, whereas you’ll find resistance kicking in at $1.1637 & $1.1697.  

If the price can manage to break above the $1.1637 hurdle, it could well be headed towards $1.1697 – provided it holds above $1.1576 of course. Conversely, if it can’t hold above that support level, you might well see a pullback towards $1.1533.

Trade Idea: If you’re feeling bullish, consider buying above $1.1637 with a target price of $1.1697 & a stop-loss below $1.1575.