US Dollar Price Forecast: Fed Holds Rates, Markets Turn to PCE and BoE Decision

US Dollar News: Feds Constraints Route Focus to Inflation and Europe

In light of the Fed holding the interest rates at 3.50%-3.75% and the Federal Open Market Committee leaving the decision to Chair Kevin Warsh, the USD, EUR, and GBP have all moved in response. Warsh is known to favor a data-dependent approach, and did not provide a substantive claim for why he is against the idea of interest rates rising, only that he and the Committee are focused on inflation returning to a target of 2%. As he provided no forward guidance, investors are now more concerned with the Personal Consumption Expenditures report followed by the Labor report, as they will provide more clarity on the expected Fed September policy meeting.

The euro continues to move upwards, relying primarily on the expectation that the European Central Bank is approaching the Italian version of the Feds “Pivot,” as the deposit rate was held at 2.25%. As inflation has gradually approached the target, ECB officials continue to express a meeting-by meeting approach, while investors await the second quarter Eurozone GDP data and July Inflation for signs of the Eurozone economic momentum. Signs of measurabl economic momentum will of course support the idea that the European Central Bank will hold policy steady for the months to follow.

Next week’s Bank of England meetings will most likely conclude with a policy decision that will not change current interest rates, and the speculations surrounding that have affected the performance of Sterling. Investors are continuing to assess the positive effects of weakening inflation against the negative consequences of strong wage growth and rising energy costs, as the geopolitical situation in the Middle East continues to worsen. The UK’s credit, housing, and business activity data will be screened to help understand the current strength of domestic demand, and to help predict how long the Bank of England can remain with its current policy.

US Dollar Index (DXY) Technical Analysis: Recovery Attempts Against Fibonacci Resistance

After a sharp increase from a low at 100.76, the U.S. Dollar Index has started to recover. The price has moved above the 23.6% of the Fibonacci retracement (100.94) and is currently at the 38.2% retracement (101.04). It is still below the 50-EMA (101.20) and the 100-EMA (101.10). The RSI has increased to 43 indicating a softening in the bearish momentum and the beginning of increases of control for the buyers in the short term.

Resistance is expected first at 101.13, then 101.22, and finally 101.34. Support initially lies at 101.04, while support at 100.94 and 100.76 are expected to be more significant.

The near-term forecast for DXY is cautiously bullish while prices are above 101.04. The more bullish case would call for recovery to 101.34 and 101.49, while bearish focus would turn to 100.76 if prices drop below 100.94.

GBP/USD Technical Analysis: BoE Decision Keeps Cable at Key Pivot

GBP/USD is currently around its main Fibonacci support of 1.3300, awaiting the BoE policy decision. Prices are currently below the 50-EMA (1.3344) and 100-EMA (1.3357) but are above the July rising trendline. RSI is around 54, showing improving momentum, but no breakout has been confirmed.

1.3400 is the resistance of immediate concern, followed by 1.3460 and 1.3559. Initial support is at 1.3300 with stronger support at 1.3229 and 1.3140.

Prior to the BoE decision, the outlook is neutral. Prices remaining above 1.3300 will keep the bullish recovery scenario intact with 1.3400 and 1.3460 as targets. A break below 1.3300 will open targets to 1.3229 and possibly 1.3140.

EUR/USD Technical Analysis: Rally Stalls Against Important Trendline Resistance

EUR/USD has increased in price after strong support at 1.1367 but rallies are restricted by long-term resistance (approx. 1.1474) and the descending trendline. Prices are above the 50-EMA (1.1406) and the 100-EMA (1.1415), and are therefore above both of the moving averages which is a bullish sign in the short term. The RSI has increased to 59, showing bullish momentum.

Initial resistance is at 1.1474, and then at 1.1527 and 1.1577 respectively. Initial support is at 1.1418 and at 1.1367 and 1.1324 respectively.

The short-term forecast for EUR/USD is bullish while the price is above 1.1418. A breakout and hold above 1.1474 would be bullish as it would invalidate the descending trendline and focus for prices would be at 1.1527. If the price fails to maintain above 1.1418, a bearish correction to 1.1367 would be expected.