EUR/USD, GBP/USD, USD/CAD, USD/JPY Forecasts – U.S. Dollar Falls As Inflation Rate Drops To 3.3%

U.S. Dollar

U.S. Dollar Index is losing ground after the release of inflation data. Inflation Rate declined from 3.4% in April to 3.4% in May, compared to analyst consensus of 3.4%. Core Inflation Rate decreased from 3.6% to 3.4%, while analysts expected that it would drop to 3.5%. Bond traders rushed to buy Treasuries, pushing their yields lower. The yield of 2-year Treasuries declined below the 4.70% level, while the yield of 10-year Treasuries settled near 4.25%. Traders should note that Fed Interest Rate Decision will be released soon, so the market will stay volatile.

In case U.S. Dollar Index settles below the support at 104.40 – 104.60, it will head towards the next support level, which is located in the 103.75 – 103.90 range.

EUR/USD

EUR/USD rallies as traders focus on U.S. inflation reports. In the EU, the final reading of Germany’s inflation rate met analyst expectations and had no material impact on market dynamics.

If EUR/USD stays above the 50 MA at 1.0833, it will head towards the nearest resistance at 1.0870 – 1.0885.

GBP/USD

GBP/USD has also enjoyed strong support as traders reacted to U.S. inflation data. In the UK, Manufacturing Production declined by 1.4% in April, while GDP was unchanged. These reports did not have a material impact on forex market dynamics as traders waited for U.S. inflation reports and Fed decision.

It should be noted that RSI has recenly moved into the overbought territory, so the risks of a pullback are increasing.

USD/CAD

USD/CAD is losing ground as traders focus on the rally in precious metals markets, which was triggered by U.S. inflation data.

In case USD/CAD stays below the 1.3700 level, it will move towards the nearest support, which is located in the 1.3600 – 1.3620 range.

USD/JPY

USD/JPY retreats as traders focus on falling Treasury yields. RSI remains in the moderate territory, so there is plenty of room to gain additional momentum.

A move below the 155.50 level will push USD/JPY towards the nearest support at 154.50 – 155.00.

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