EUR/USD, GBP/USD, and USD/JPY expected to continue dollar weakness theme
US dollar weakness story looks likely to continue despite recent blips for EUR/USD, GBP/USD and USD/JPY.
EUR/USD weakness could be short-term in nature
EUR/USD has been losing traction since Friday's high, with the losses seen for equities feeding through into short-term dollar strength. Whether we see equities rise further is going to be key here, with the declines seen for inflation helping to bolster confidence that central banks will be able to ultimately shorten the tightening phase for central banks.
Given the dollar strength that has come with this phase of higher rates, it would be likely that we see it unwind once inflation fears become lessened. As we have seen over recent months. With that in mind, further upside does look likely before long. The daily chart highlights the uptrend playing out since late-September, with the recent pullback likely to ultimately resolve in another move higher. A decline through the $1.0483 support level would be required to bring about a bearish reversal signal. Until then, the bullish trend remains intact.
GBP/USD pushing upwards as inflation heads lower
GBP/USD has continued to move higher over the course of the past fortnight, coming off the back of a weak period at the end of 2022. Today has seen another fresh batch of inflation data, with UK consumer price index (CPI) falling back for the second consecutive month. However, it is notable that we are seeing core inflation tick higher, with the gap closing to highlight a lessening influence of volatile factors like energy.
The fact that inflation continues to roll over brings hope that we have seen prices top out. With that in mind, continued downside in prices should bring further upside for GBP/USD, where $1.2446 represents the notable resistance up ahead. To the downside, a move below the $1.2086 level would dampen this current bullish sentiment.
USD/JPY rebound likely to be sold into
USD/JPY has been on the slide over the course of the past three-months, with a shift in Bank of Japan (BoJ) approach coming as inflation takes the steam out of the dollar. However, we have seen a surprise decision to keep their YCC policy unchanged overnight, bringing downside for the Yen.
Despite today’s unwinding of positions that had anticipated a widening or abandonment of the YYC policy, the ongoing issues remain prevalent. As such, the recent downtrend remains intact, with further downside looking likely as a result. With that in mind, a bearish outlook remains intact unless ¥134.77 is broken. Keep an eye out for trendline resistance as another factor which could drive price lower once again.
This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.
Start trading forex today
Find opportunity on the world’s most-traded – and most-volatile – financial market
- Trade spreads from just 0.6 points on EUR/USD
- Analyse with clear, fast charts
- Speculate wherever you are with our intuitive mobile apps
See an FX opportunity?
Try a risk-free trade in your demo account, and see whether you’re onto something.
- Log in to your demo
- Try a risk-free trade
- See whether your hunch pays off
See an FX opportunity?
Don’t miss your chance – upgrade to a live account to take advantage.
- Get spreads from just 0.6 points on popular pairs
- Analyse and deal seamlessly on fast, intuitive charts
- See and react to breaking news in-platform
See an FX opportunity?
Don’t miss your chance. Log in to take your position.
Live prices on most popular markets
- Forex
- Shares
- Indices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.
