Market Overview

The U.S. Dollar (USD) remained stable after the Federal Reserve kept the Federal Funds Rate unchanged at 4.50%, maintaining a cautious stance amid economic uncertainty. The FOMC Statement and Press Conference reinforced expectations of a wait-and-see approach, keeping traders focused on upcoming economic data.

The Advance GDP report, expected at 2.7% (down from 3.1%), could impact sentiment if growth slows further. Unemployment Claims are projected at 224K, slightly above the previous 223K, indicating a softening labor market. Meanwhile, the Advance GDP Price Index at 2.5% suggests lingering inflation risks.

With Pending Home Sales and Natural Gas Storage reports ahead, potential volatility in the USD is expected.

US Dollar Index (DXY) – Technical Analysis

The Dollar Index (DXY) is holding steady at $107.900, up 0.04%, as traders assess economic data and Federal Reserve policy signals. The $107.90 pivot level is a key battleground, with the 50-day EMA at $107.91 offering immediate guidance. If DXY remains above $107.90, the bullish bias could strengthen, with resistance at $108.42 and an extended upside target of $108.90.

On the downside, support sits at $107.42, with a break below potentially exposing $106.96. The 200-day EMA at $108.26 suggests strong overhead resistance, meaning a clear breakout is needed for further upside.

For now, DXY remains bullish above $107.90, but a break below this level could shift momentum, bringing sellers into the market.

GBP Steady as BOE’s Bailey Highlights Growth Priorities

The British Pound (GBP) held steady as Bank of England (BOE) Governor Andrew Bailey emphasized the importance of boosting economic growth while maintaining financial stability. Bailey supported government initiatives to spur expansion and acknowledged uncertainty surrounding the Basel III implementation.

On Thursday, key economic data will include M4 Money Supply, which edged up 0.2%, and Mortgage Approvals, which slightly declined to 65K from 66K. Net Lending to Individuals increased to £3.6B, reflecting stable credit conditions.

GBP/USD Technical Analysis

GBP/USD is inching lower, trading at $1.24448, down 0.03%, as it struggles to hold above key support levels. The pair remains below the $1.24584 pivot, reinforcing a bearish bias unless buyers regain control. Immediate resistance is seen at $1.25111, with a breakout potentially driving the pair toward $1.25751.

On the downside, $1.23938 serves as critical support, followed by $1.23443, where sellers may intensify pressure. The 50-day EMA at $1.24262 is keeping the pair supported for now, but the 200-day EMA at $1.23805 suggests a deeper correction may be ahead. Unless GBP/USD breaks above $1.24584, sellers remain in charge.

Euro Weakens as GDP Data Disappoints, ECB Decision Looms

The Euro (EUR) faced downward pressure after French Flash GDP contracted by -0.1%, missing expectations of 0.0% and signaling economic weakness. German Prelim GDP also fell to -0.1%, reinforcing concerns about sluggish growth. However, French Consumer Spending rose 0.7%, surpassing the 0.1% forecast, offering a slight boost.

Meanwhile, Spanish CPI increased to 3.0%, exceeding expectations, suggesting inflation remains a concern. Traders are now focused on the ECB’s Main Refinancing Rate decision, with a projected cut to 2.90% from 3.15%. The ECB Press Conference will provide further insights into policy direction.

With weak GDP data and ECB policy uncertainty, the EUR remains vulnerable ahead of key economic announcements.

EUR/USD Technical Forecast

EUR/USD is hovering around $1.04200, down 0.01%, as it struggles to gain traction amid a cautious market mood. The pair is testing key levels near the $1.04276 pivot, with immediate resistance at $1.04801 and stronger hurdles at $1.05321. A breakout above $1.04276 could shift sentiment bullish, potentially pushing the pair toward these higher resistance zones.

On the downside, $1.03841 serves as critical support, with a break lower exposing $1.03391, reinforcing a bearish outlook. The 50-day EMA at $1.04293 aligns closely with current price action, while the 200-day EMA at $1.03927 underpins broader support. For now, EUR/USD remains in a bearish bias below $1.04276, but a decisive move above this pivot could attract buyers.