The global forex market continues to demonstrate dynamic shifts as investors react to changing economic data, central bank policies, and geopolitical developments. In this week’s Forex Markets Analysis, we highlight the key currency trends shaping global trading sentiment and what traders should watch in the days ahead.
1. U.S. Dollar (USD): Strength Holds Amid Cautious Optimism
The U.S. dollar maintained its position near recent highs this week, supported by strong U.S. employment data and lingering expectations that the Federal Reserve will keep interest rates elevated for longer.
- Key driver: The latest Non-Farm Payroll (NFP) report showed continued job market resilience, reinforcing the Fed’s cautious stance.
- Market impact: The Dollar Index (DXY) hovered above the 105 level, signaling sustained demand for the greenback as a safe haven.
- Outlook: Traders are closely monitoring upcoming CPI inflation data and Fed comments for hints of a potential rate cut timeline in 2025.
Technical view:
- Support: 104.70
- Resistance: 106.20
- Bias: Bullish above 105.00
2. Euro (EUR): Struggling to Rebound Against Dollar Strength
The euro faced renewed pressure this week, slipping below 1.07 against the dollar, as weak manufacturing figures from Germany and sluggish consumer sentiment weighed on the currency.
- Key driver: The European Central Bank (ECB) continues to signal that inflation remains under control, increasing the odds of a rate cut later this quarter.
- Market sentiment: Euro traders are cautious, with little appetite for risk amid diverging monetary policies between the ECB and the Fed.
Technical view:
- Support: 1.0640
- Resistance: 1.0750
- Bias: Neutral to bearish
3. British Pound (GBP): Caught Between Inflation and Growth Risks
The British pound traded in a narrow range this week as markets weighed stubborn inflation against slowing economic growth. The Bank of England (BoE) remains cautious, with officials hinting that rate cuts may not come until mid-2025.
- Key driver: Latest inflation data showed headline CPI still above target at 3.4%, complicating the BoE’s policy outlook.
- Market impact: GBP/USD hovered near 1.22, with traders awaiting further guidance from BoE Governor Andrew Bailey’s speech later this week.
Technical view:
- Support: 1.2140
- Resistance: 1.2280
- Bias: Slightly bullish above 1.22
4. Japanese Yen (JPY): Weakness Persists Despite Intervention Speculation
The Japanese yen remains under heavy pressure, with USD/JPY testing the 151.00 level, as interest rate differentials continue to favor the U.S. dollar. However, growing speculation about a potential Bank of Japan (BoJ) intervention has limited further yen weakness.
- Key driver: BoJ officials have reiterated that policy normalization will be gradual, keeping rates near zero for now.
- Market sentiment: Traders remain cautious, as any sign of government action could trigger short-term volatility in yen pairs.
Technical view:
- Support: 149.80
- Resistance: 151.50
- Bias: Bullish, but intervention risk remains high
5. Australian Dollar (AUD): Supported by Commodity Strength
The Australian dollar managed to recover some ground this week, buoyed by strong commodity prices and improving risk sentiment in Asia.
- Key driver: Rising iron ore and gold prices provided a tailwind for the Aussie, even as the Reserve Bank of Australia (RBA) kept policy rates unchanged.
- Market impact: AUD/USD climbed back toward 0.65, supported by improved demand from China.
Technical view:
- Support: 0.6420
- Resistance: 0.6560
- Bias: Bullish in short term
6. Canadian Dollar (CAD): Tracking Oil Prices and U.S. Data
The Canadian dollar traded mixed this week, following fluctuations in crude oil prices. While oil prices rebounded slightly, dovish remarks from the Bank of Canada (BoC) kept the loonie under pressure.
- Key driver: BoC Governor Tiff Macklem indicated the bank could cut rates if inflation continues to ease.
- Market impact: USD/CAD hovered around 1.37, with traders watching oil trends for near-term direction.
Technical view:
- Support: 1.3640
- Resistance: 1.3780
- Bias: Neutral to bullish for USD/CAD
7. Emerging Market Currencies: Mixed Performance
Emerging market currencies showed mixed performance this week amid fluctuating risk appetite. The Chinese yuan (CNY) remained stable following supportive measures from Beijing, while the Indian rupee (INR) strengthened modestly on solid foreign investment inflows.
Highlights:
- USD/CNY: Stable around 7.28 amid controlled volatility.
- USD/INR: Declined toward 83.00, reflecting stronger local equity markets.
Weekly Summary
| Currency | Trend | Key Drivers | Outlook |
|---|---|---|---|
| USD | Bullish | Fed policy, strong labor data | Watch inflation data |
| EUR | Bearish | Weak EU data, dovish ECB | Likely to stay weak |
| GBP | Neutral | Sticky inflation | Range-bound |
| JPY | Bearish | Yield differentials | Risk of intervention |
| AUD | Bullish | Commodity recovery | Short-term upside |
| CAD | Neutral | Oil prices, BoC stance | Sideways movement |
What to Watch Next Week
- U.S. CPI & PPI Data: Critical for Fed rate expectations.
- ECB and BoE Speeches: May hint at future monetary easing.
- China’s GDP Data: A key driver for AUD and commodity-linked currencies.
- Oil Price Trends: Continue to influence CAD and emerging markets.
Conclusion
This week’s forex landscape remains defined by central bank divergence and economic uncertainty. The U.S. dollar continues to dominate, supported by resilient growth and higher yields, while most major peers face mixed domestic data.
For traders, this means staying agile — watching for macro data releases, central bank statements, and technical breakout levels that could shape the next big move.
