- High impact US Preliminary GDP data is due today, and this is likely to determine the course of the US Dollar over the next 24 hours and possible longer.
- The Yen is the weakest currency so far today, and the strongest is the US Dollar, although the EUR/USD is likely to best for long USD today.
- The best opportunities to short the USD will likely arise in the GBP/USD currency pair.
Top Forex Brokers
US Dollar Index (DXY): Technical Analysis
The US Dollar been rising in recent days, in line with its long-term bullish trend. The greenback has been broadly gaining since the start of 2024, albeit with deep bearish retracements.
Yesterday saw a strong rise in price which was given a tailwind by Fed Member Kashkari’s hawkish comments on inflation and rates, which seemed to trigger a switch towards greater risk-off sentiment. US Dollar Treasury Yields are also near their long-term highs.
The hourly price chart shows that these strong gains sent the Dollar Index breaking out above former resistance levels, and it seems as if the nearest support level is now sitting at 104.63. This suggests that if the level holds then we should see the price rise, but unfortunately for bulls there is resistance overhead which was recently rejected at 104.78. This suggests that bulls will need to overcome this level before a long trade will start to look comfortable.
If the price can get established above 104.78, it is likely to rise further so that could facilitate a good long trade. Alternatively, if the price drops below 104.63, the Dollar will probably give up more of yesterday’s gains over the course of today.
The table below shows that the US Dollar has been the strongest major currency so far today, while the Japanese Yen has been the weakest.
Read on to get more of my Forex daily analysis and prediction.
US Dollar Index (DXY): Fundamental Analysis
Kashkari’s recent hawkish comments seem to have slightly pushed back expectations on the timing of the first US Fed rate cut. According to the CME Fedwatch tool, the consensus forecast for the initial rate cut has decreased in certainty that the first cut will be at the Fed’s November meeting, expected by about 60%. So, expectations have become more hawkish in recent days.
The US Preliminary GDP data due later today will be closely watched. Annualized GDP growth is expected to stand at 1.2%. If the rate is significantly higher, it could increase expectations of an earlier hike in September.
Recent gains by the US Dollar have been expressed most strongly against the weak Japanese Yen and Swiss Franc. The Japanese Yen is suffering from long-term weakness, but the weakness in the Swiss Franc is a bit strange and hard to explain. The Euro is also showing some weakness. This suggests that long USD will be best against the JPY (in USD/JPY) or the Euro (in EUR/USD).
USD/JPY Forecast: Technical Analysis
The Japanese Yen is the weakest major currency, having lost today against every major currency except the Swiss Franc. The US Dollar is the strongest, which arguably makes the short-term outlook for the USD/JPY currency pair bullish.,
A cautionary factor for bulls should be the fact that the price is now close to the area which prompted an intervention by the Bank of Japan in support of the Yen. It is starting to seem as if all this intervention bought was time: it is hard for a central bank to strengthen their own currency without making strong rate hikes, which the Bank of Japan is not yet prepared to do.
The price has just bounced off the support level at ¥156.59, but has run into the first of three nearby resistance levels, and has rejected this resistance at ¥157.09.
A speculative long trade could be possible from another bounce off ¥156.59, but I would prefer to wait for a sustained bullish breakout beyond the resistance level at ¥157.50 which is also a major quarter-number. This can almost certainly only take place after the release of US Preliminary GDP data later today, and it will probably require a number higher than 1.2% to push the price above that level.
Due to the danger of intervention by the Bank of Japan against long trades, it may be better to use the EUR/USD currency pair as a vehicle to get long of the USD.
Support Levels:
- ¥156.59
- ¥155.89
- ¥155.02
Resistance Levels:
- ¥157.09
- ¥157.30
- ¥157.49
Want to trade my USD/JPY forecast? Check out our list of the best MetaTrader brokers in Asia worth reviewing.
EUR/USD Forecast: Technical Analysis
The Euro is showing relative weakness today. However, the technical picture within the past few hours has shown a strong rise, but this is running into the nearest resistance level at $1.0816. There are two more resistance levels close by just beyond that level, so this cluster is likely to be significant and pivotal today.
If the price cannot get established above $1.0831, it is likely to turn bearish again later, in line with the longer-term weakness of the EUR. A bearish rejection of any resistance level after the US Advance GDP data release later could be a good short trade entry signal, and the EUR/USD currency pair is likely to be the safest major currency pair to use to be long of USD.
Support Levels:
- $1.0784
- $1.0758
- $1.0739
Resistance Levels:
- $1.0816
- $1.0821
- $1.0831
Want to trade my EUR/USD forecast? Check out this list of the best Forex brokers worth reviewing.
GBP/USD Forecast: Technical Analysis
The British Pound stands out as a relatively strong currency due to its long-term bullish trend and recent breakout to new multi-month high prices. This puts this GBP/USD currency pair into the category of one that will be better to trade against the USD, than to use to try to exploit any USD strength.
The technical bullishness is evidenced by very firm and persistent support at $1.2681 where there is a double bottom, arguably even a triple bottom.
Despite this, there are a few significant resistance levels relatively close by, although not as tightly packed as they are in the EUR/USD. This makes a long trade more interesting here, but it might be wise to wait for the price to get above the third resistance level at $1.2771 before entering such a trade. More aggressive traders can try entering long from another bullish bounce at the support level at $1.2681.
If the Preliminary US GDP data released later is notably weaker than the expected growth of 1.2%, looking for a long trade here could be a good idea.
Support Levels:
- $1.2647
- $1.2603
- $1.2592
Resistance Levels:
- $1.2710
- $1.2732
- $1.2759
Want to trade my GBP/USD forecast? Check out our list of the top 10 Forex trading platforms worth reviewing.