US DOLLAR FORECAST – EUR/USD, GBP/USD, AUD/USD
- The US dollar could fall in the short term
- The decline in US Treasury yields will act as a headwind for the greenback
- This article examines the technical outlook for EUR/USD, GBP/USD and AUD/USD, with a focus on price action dynamics and key current levels
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The US dollar, as measured by the DXY index, has fallen more than 2.15% this month. However, in recent days, selling pressure has eased, allowing the broader greenback to gain slightly in value. Despite the stabilization, the downward correction that began a few weeks ago is unlikely to be complete yet.
One variable that could weigh on the U.S. currency is the recent move in Treasury bonds as traders look to advance the “Fed pivot.” By comparison, yields have fallen sharply this month, with the decline accelerating following subdued US CPI and PPI data in October. Both reports surprised negatively and triggered a moderate reassessment of interest rate expectations.
Yields could fall further if the economic weakness, clearly reflected in the latest jobless claims numbers, worsens through 2024. This scenario is expected given the impact of previous tightening measures on the real economy.
Another factor that could further depress yields and the U.S. dollar is the massive selloff in oil, which has plunged nearly 20% this quarter. If the trend of falling energy costs continues, inflation will slow faster than forecast, reducing the need for an overly hawkish stance from the Federal Reserve.
For a detailed analysis of the euro’s medium-term prospects, be sure to download our fourth quarter technical and fundamental forecast
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EUR/USD FORECAST – TECHNICAL ANALYSIS
EUR/USD was subdued on Thursday after a moderate decline in the previous session. Despite the market’s indecision, the Euro maintains a constructive bias against the US Dollar as prices have recently made higher highs and lows and are trading above key moving averages.
To reinforce the bullish outlook, the pair needs to stay above the 200-day and 100-day SMA near 1.0765. Successful defense of this support zone could pave the way for the exchange rate to break above the psychological level of 1.0900 and head towards Fibonacci resistance at 1.0960, followed by 1.1075.
If sellers regain strength and push EUR/USD below 1.0765, the short-term bias could shift to a bearish outlook for the common currency. This potential development could result in a move lower towards 1.0650, with continued weakness increasing the risk of retesting trendline support at 1.0570.
EUR/USD TECHNICAL CHART
EUR/USD chart created with TradingView
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GBP/USD FORECAST – TECHNICAL ANALYSIS
On Thursday, GBP/USD maintained a subdued stance and struggled to gain positive momentum, witnessing a slight consolidation below the 200-day simple moving average. In case of escalating losses, primary support lies at 1.2320. Maintaining this crucial floor is essential to reviving hopes of a sustained uptrend; Otherwise, there could be a decline towards the 1.2200 threshold.
Should the bulls regain control, initial resistance is expected at 1.2450/1.2460. Clearing this barrier to the upside could generate fresh buying interest and lay the foundation for a possible rally towards the 100-day simple moving average. With further strength, we could see a move towards 1.2590, which is the 50% Fibonacci retracement of the July/October decline.
GBP/USD TECHNICAL CHART
GBP/USD chart created with TradingView
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Change into | Longs | Short pants | OI |
| Daily | 8th % | -5% | 3% |
| Weekly | -25% | 41% | -12% |
What does this mean for price developments?
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AUD/USD FORECAST – TECHNICAL ANALYSIS
After strong gains earlier in the week, AUD/USD fell on Thursday, with prices slipping below the 100-day SMA after being rejected at the 0.6500 level. If the retracement continues, support lies at 0.6460 and then at 0.6395. If there is further weakness, a decline towards 0.6350 is plausible.
On the other hand, if the pair continues its rise, technical resistance lies around the 0.6500 level. Overcoming this hurdle could be a challenge for the bullish camp, but a clean and clear breakout could trigger a rally towards the 200-day simple moving average, which is slightly below the 0.6600 level.
AUD/USD TECHNICAL CHART
AUD/USD chart created with TradingView