Skip to content

CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please ensure that you fully understand the risks involved. CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please ensure that you fully understand the risks involved.

Market update: US dollar struggles at resistance amid softening data; EUR/USD, GBP/USD, USD/CAD price set-ups

The US dollar index is struggling at key resistance, raising the prospect of a retreat, while EUR/USD and GBP/USD are around key support levels.

Source: Bloomberg

USD vs EUR, GBP, CAD

The recent struggle at key resistance reinforces the view that the US dollar’s (DXY index) rally is losing steam as recent data eases concerns that the US economy is resurging.

The US Economic Surprise Index has rolled over from two-year highs in a sign that much of the optimism could be in the price. The ongoing disinflation coupled with early signs that the labor market could be cooling (unemployment jumped in August) has capped expectations of further tightening by the US Federal Reserve.

Markets are now pricing in a more than 90% chance that the Fed will keep interest rates on hold when it meets later this month, with around 60% chance of no more rate hikes this year. 

Moreover, the rapid support measures in recent months by China to revive the economy are providing a floor to sentiment, at least for now, weighing on the greenback. Having said that, the DXY index would need to fall below 102.50 103.00 for the uptrend to reverse.

On technical charts, the short-term bullish pressure remains intact after the DXY index rebounded last week from quite a strong converged floor at 102.50-1.0300, including the 89-period moving average and the lower edge of the Ichimoku cloud on the 240-minute charts. As highlighted in a recent update, the index needs to fall below the support for the uptrend to change.

DXY index daily chart

Source: TradingView

Zooming out, the index has been struggling to clear past a tough barrier at the May high of 104.70, slightly above the 200-day moving average. Negative divergence on the daily charts (declining momentum associated with flat index levels) is a sign that the index lacks the strength to break past the barrier, raising the risk of a retreat.

DXY index (USD) 240-minute chart

Source: TradingView

EUR/USD: awaiting confirmation of a low

EUR/USD is near a fairly strong cushion on the 200-day moving average, coinciding with the lower edge of an upward-sloping channel, and the 89-week moving average. Despite the choppy price action since the beginning of 2023, the pair hasn’t made a lower low since late last year, suggesting that the broader bias remains up.

However, any fall below 1.0500-1.0600 could threaten the uptrend. Meanwhile, EUR/USD is looking oversold, raising the prospect of a rebound. For any rebound to be material, the pair would need to cross above last week’s high of 1.0950. 

EUR/USD weekly chart

Source: TradingView

GBP/USD: settles in a range

GBP/USD continues to be weighed by important immediate resistance at the August 10 high of 1.2820, slightly below another barrier at the end-July high of 1.3000, reinforcing the bigger-picture consolidation

So far, the pair is holding above quite strong converged support at the end-June low of 1.2600, a shade above the 200-day moving average. Only a break below the May low of 1.2300 would disrupt the higher-low-higher-high sequence since late 2022. Until then, the trend could be sideways at best. 

GBP/USD daily chart

Source: TradingView

USD/CAD: at a key threshold

USD/CAD is testing a crucial resistance at the Q2-2023 high of 1.3650. For the broader downward bias to remain intact, the pair needs to hold below this resistance. This follows a rebound in July from near-strong converged support on the 200-week moving average and the 89-week moving average. However, any break below last week’s low of 1.3500 would confirm that the short-term upward pressure had faded. 

USD/CAD weekly chart

Source: TradingView

This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. 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.

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

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. Please see important Research Disclaimer.

Please also note that the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

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.

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Tuesday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

<h3>How much does trading cost?</h3>
<h3>Find out about IG</h3>
<h3>Plan your trading</h3>

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.