Dollar Index Pulls Back Slightly Today: Analysis for EUR/USD, GBP/USD, USD/CAD, USD/JPY

The U.S. Dollar Index (DXY) is trading around 108.93 after peaking at 109.54, marking a two-year high. Despite a slight intraday dip of 0.14%, the index is poised for a 0.9% weekly gain, reflecting the dollar’s resilience amid expectations of continued economic outperformance by the U.S. Solid labor market data and persistent inflation have driven Treasury yields higher, bolstering dollar demand. However, potential policy delays under the incoming administration could limit further short-term gains. Technically, DXY faces resistance near the 109.50-109.62 zone, with support at 108.50 and the 50-SMA at 108.28.

Euro (EUR/USD)

The euro is trading at $1.0303, having recovered 0.06% intraday, yet down 1.35% for the week, its worst performance since November. The pair has been under pressure from a weaker growth outlook and expectations that the European Central Bank (ECB) may implement deeper rate cuts compared to the Federal Reserve. Uncertainties surrounding European politics, including the French budget and German elections, are additional bearish factors. EUR/USD is trading below the 50-SMA (1.0382), signaling bearish momentum. Resistance lies at 1.0345, with key support levels at 1.0231 and 1.0216. RSI hovers at 37.97, suggesting the pair is approaching oversold territory, hinting at a possible short-term bounce.

GBP/USD has edged higher by 0.1% to 1.2430 but remains down 1.39% for the week, signaling continued weakness. The pair trades below the 50-SMA (1.2516), reinforcing bearish sentiment. Key resistance sits at 1.2490, while support is found around 1.2475. A deeper decline could see the pound testing the 1.2400 area. Fundamentally, the dollar’s strength and expectations of diverging monetary policies favoring the U.S. weigh on sterling. RSI at 40.19 indicates GBP/USD is still in bearish territory but could stabilize if dollar momentum pauses.

U.S. Dollar/Canadian Dollar (USD/CAD)

USD/CAD is trading at 1.4451, down slightly by 0.04% intraday, reflecting consolidation after recent gains. The pair remains above the 50-SMA (1.4390), indicating bullish momentum. Resistance is noted at 1.4539, with immediate support around 1.4349. RSI at 63.15 signals near overbought conditions but not excessively so, suggesting room for further upside if dollar strength persists.

U.S. Dollar/Japanese Yen (USD/JPY)

USD/JPY trades at 157.11, retreating 0.03% from recent highs but staying close to a five-month peak at 158.09. The yen remains under pressure due to wide U.S.-Japan interest rate differentials, with the Bank of Japan reluctant to hike rates aggressively. Technical support stands at 156.48, while resistance near 158.50 could cap further gains. RSI at 48.87 suggests the pair is neutral, with potential for either direction depending on upcoming data and yield movements.

More Information in our Economic Calendar.