US Dollar Forecast: Awaits ADP Data to Confirm Direction, Treasury Yields and GBP/USD Outlook

Market Overview

The US Dollar strengthened on Tuesday, supported by robust economic data. The ISM Services PMI rose to 54.1, exceeding forecasts of 53.5, signaling continued growth in the services sector. Additionally, JOLTS job openings increased to 8.10M, highlighting resilience in the labor market. The 10-year bond auction yield hit 4.68%, further bolstering the dollar’s appeal.

Looking ahead, key events such as ADP Non-Farm Employment Change, unemployment claims, and crude oil inventories will shape the dollar’s trajectory. Continued strength in the labor market and energy data could solidify the greenback’s dominance in global markets.

US Dollar Index (DXY) – Technical Analysis

The Dollar Index (DXY) is trading at $108.636, up 0.04%, as it consolidates above the key pivot point of $108.428 on the 4-hour chart. Immediate resistance is at $108.915, with a stronger hurdle at $109.529, suggesting room for further upside if momentum holds.

On the downside, support rests at $107.625, followed by $107.147, marking key zones to watch for potential retracements. The 50 EMA at $108.377 aligns closely with the pivot point, indicating near-term stability, while the 200 EMA at $107.265 provides a solid long-term support level.

A sustained move above $108.428 signals bullish momentum, potentially targeting $108.915. However, a break below $108.428 could drive sharp selling pressure toward $107.625. Keep an eye on the next move to confirm direction.

US 10-year Bond Yields

US 10-year bond yields are at 4.673%, slightly down by 0.17% but still within an upward channel, supported by the 50 EMA at 4.622%. This indicates persistent demand for US Treasuries amidst inflationary pressures and expectations of steady Fed policy. Rising yields generally support the US Dollar Index (DXY), which gains strength as higher yields attract global investors seeking returns.

A continued rise in yields could push the DXY higher, potentially impacting emerging market currencies and commodities like gold. Conversely, a breakdown in yields may signal easing Fed rate expectations, softening dollar strength.

Sterling Weakens as UK Construction and Housing Decline

The British Pound softened on Tuesday as mixed economic data weighed on sentiment. The Halifax HPI fell by 0.2%, missing the forecast of 0.8%, while the Construction PMI dropped to 53.3, signaling slowing growth in the sector.

Housing equity withdrawals hit -£12.5B, reflecting reduced consumer confidence. However, retail sales surprised positively, rising 3.1% y/y, providing some support.

With no key events ahead, the Pound remains sensitive to broader market sentiment.

GBP/USD Technical Analysis

GBP/USD is trading at $1.24843, up 0.06%, as the pair holds just above the pivot point of $1.24720 on the 4-hour chart. Immediate resistance is seen at $1.25639, with the next hurdle at $1.26617. On the downside, key support levels are located at $1.24072 and $1.23623.

The 50 EMA at $1.24907 aligns closely with the current price, indicating a consolidative phase. The 200 EMA at $1.25527 marks a significant resistance zone. A sustained break above $1.24720 supports bullish momentum, targeting $1.25639. However, a move below $1.24720 could trigger sharp selling pressure toward $1.24072.