EUR/USD, GBP/USD, DXY Forecast: Dollar Index Gains, Support at $105; Buy Now?

By:

Arslan Ali

Updated: Jun 11, 2024, 08:15 GMT+00:00

Key Points:

Italian industrial production fell by 1.0%, weakening the EUR/USD pair.
UK claimant count surged to 50.4K, adding bearish pressure to GBP/USD.
Dollar Index remains bullish above $105.060, driven by strong US Treasury yields.

In this article:

EUR/USD

-0.13%

GBP/USD

-0.07%

Market Overview

The beginning of the week saw some significant data releases that impacted the forex markets. Italian Industrial Production for May showed a decline of 1.0%, much worse than the expected 0.3% increase and the previous month’s -0.5%. This sharp drop indicates a slowdown in Italy’s manufacturing sector, which has contributed to the euro’s weakness against the dollar, impacting the EUR/USD pair negatively.

On a more positive note for the euro, Sentix Investor Confidence improved to 0.3 from the previous -3.6, surpassing the forecast of -1.5. German Buba President Nagel’s speech was another key event, although the specifics of his remarks are yet to be fully analyzed. His comments typically influence market expectations regarding the Eurozone’s monetary policy, adding another layer of complexity to the EUR/USD movements.

Turning to the UK, the latest labor market data painted a mixed picture. The Claimant Count Change surged to 50.4K, well above the forecasted 10.2K and the previous 8.4K. Wage growth remained robust, with the Average Earnings Index holding steady at 5.9%, matching expectations. The Unemployment Rate edged up to 4.4%, slightly higher than the anticipated 4.3%, adding to the bearish sentiment surrounding the pound.

Events Ahead

Looking ahead, the NFIB Small Business Index is expected at 89.8, a slight improvement from the previous 89.7. This index is a good barometer of small business sentiment and can provide insights into broader economic trends.

For the UK, the CB Leading Index m/m, forecasted at -0.1%, will be closely watched for signs of economic direction. Any significant deviation from expectations could sway the GBP/USD pair.

The upcoming 10-year Bond Auction in the US, expected to yield 4.48% with a bid-to-cover ratio of 2.5, will be crucial. A strong auction can support the dollar by reflecting confidence in US economic stability and investor demand for US debt.

US Dollar Index (DXY)

Dollar Index

The Dollar Index is trading at $105.153, up 0.31%. On the 4-hour chart, the pivot point is set at $105.060. Immediate resistance levels are at $105.386, $105.605, and $105.806. Support levels are located at $104.858, $104.694, and $104.529.

Technical indicators show the 50-day EMA at $104.785 and the 200-day EMA at $104.703, suggesting underlying support.

The outlook remains bullish above the pivot point of $105.060, but a break below this level could trigger a sharp selling trend.

EUR/USD Technical Forecast

EUR/USD Price Chart – Source: Tradingview

EUR/USD is trading lower at $1.07677, reflecting a decline of 0.43%. The 4-hour chart shows a pivot point at $1.07793. Immediate resistance levels are noted at $1.08143, $1.08544, and $1.09022. On the downside, support levels are found at $1.07336, $1.07001, and $1.06746.

Technical indicators highlight the 50-day EMA at $1.08116 and the 200-day EMA at $1.08318, suggesting potential resistance ahead. A bearish engulfing candle on the 2-hour timeframe indicates a potential continuation of the downtrend. The outlook remains bearish below $1.07793, with a break above this level potentially boosting bullish sentiment.

GBP/USD Technical Forecast

GBP/USD Price Chart – Source: Tradingview

GBP/USD is trading at $1.27166, reflecting a slight decline of 0.03%. On the 4-hour chart, the pivot point is at $1.27233. Immediate resistance levels are identified at $1.27398, $1.27628, and $1.27870. Support levels are found at $1.26956, $1.26737, and $1.26463.

Technical indicators show the 50-day EMA at $1.27445 and the 200-day EMA at $1.27224, suggesting potential resistance ahead. The outlook remains bearish below the pivot point of $1.27233, with a break above this level potentially boosting bullish sentiment.

For a look at all of today’s economic events, check out our economic calendar.

About the Author

Arslan Aliauthor

Arslan is a finance MBA and also holds an MPhil degree in behavioral finance. An expert in financial analysis and investor psychology, Arslan uses his academic background to bring valuable insights about market sentiment and whether instruments are likely to be overbought or oversold.