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Most Read: US Dollar Forecast – Bulls Return as Bears Bail; Setups on EUR/USD, USD/JPY, AUD/USD
The U.S. dollar, as measured by the DXY index, extended its gains and was sharply higher on Monday, bolstered by surging U.S. Treasury yields in the wake of strong economic numbers and hawkish Federal Reserve rhetoric in recent trading sessions. The 2-year note, in particular, surged past 4.45%, marking its highest level since the beginning of the year.
Last Friday, the U.S. nonfarm payrolls report set a positive tone for the U.S. currency by revealing that U.S. employers had added 353,000 jobs in January, nearly double the consensus estimates. Today, the string of favorable data continued with the January ISM services PMI accelerating to 53.4 from the previous 50.5, handily beating the expected 52.00.
The greenback also found support in the remarks made by FOMC Chairman Jerome Powell over the weekend. In a televised interview aired on Sunday, Powell indicated that the central bank was unlikely to have the confidence to reduce borrowing costs in March, as acting too soon could potentially allow inflation to settle above the 2.0% target.
With the U.S. economy showing remarkable resilience and inflationary pressures displaying stickiness, policymakers may delay the start of the easing cycle and deliver fewer rate cuts than anticipated by the market when the process gets underway. Against this backdrop, yields could rise further in the near term before pivoting to the downside later in the year, a constructive backdrop for the U.S. dollar now.
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USD/JPY TECHNICAL ANALYSIS
USD/JPY pushed higher on Monday, clearing trendline resistance at 148.35 and approaching a key ceiling at 148.90. With the bulls firmly in control, it seems likely that this barrier could soon be breached. In such a scenario, we could witness a rally towards 150.00, and perhaps even 152.00.
Conversely, if sellers regain the upper hand and initiate a pullback, support emerges at 148.35, followed closely by 147.40, which roughly corresponds to the 100-day simple moving average. While this price zone may provide some stabilization during a slump, a breakdown could result in a drop towards 146.00.
USD/JPY TECHNICAL CHART
USD/JPY Chart Created Using TradingView
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EUR/USD TECHNICAL ANALYSIS
EUR/USD plummeted on Monday, breaking below the 100-day simple moving average and trendline support near 1.0780. To prevent a deeper pullback, the bulls must defend 1.0720 at all costs; failure to do so could spark a retracement towards 1.0650. On further weakness, all eyes will be on 1.0525.
In the event of a bullish reversal from the pair’s current position, resistance looms at 1.0780. Moving beyond this technical ceiling, traders are likely to shift their attention on the 200-day simple moving average located near 1.0840. Above this area, the crosshairs will squarely fall on the 1.0900 handle.
EUR/USD TECHNICAL ANALYSIS CHART
EUR/USD Chart Created Using TradingView
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| Change in | Longs | Shorts | OI |
| Daily | 35% | -5% | 19% |
| Weekly | 48% | -26% | 12% |
GBP/USD TECHNICAL ANALYSIS
GBP/USD has been consolidating inside a symmetrical triangle recently. This continuation pattern resolved to the downside on Monday, triggering a sharp move below the 200-day simple moving average at 1.2560. If losses intensify later this week, support lies at 1.2455, followed by 1.2340.
On the flip side, if sentiment improves and the pound manages to stage a comeback against the U.S. dollar, resistance is seen at 1.2560. Should the rebound gather strength and extend beyond this level, the focus will likely shift to the 1.2600 handle and 1.2680 thereafter.
GBP/USD TECHNICAL CHART
