US Dollar Forecast: Retail Sales Data Looms as EUR/USD and GBP/USD Hold Gains

Market Overview

The US dollar showed resilience on Thursday after the release of key inflation data. The Producer Price Index (PPI) rose 0.4% in January, surpassing the forecasted 0.3% but slowing from December’s 0.5%.

Core PPI, excluding food and energy, matched expectations at 0.3%, signaling persistent but stabilizing inflation. Meanwhile, initial jobless claims dropped to 213K, below the projected 217K, highlighting continued labor market strength.

The 30-year bond auction saw yields fall to 4.75%, down from the previous 4.91%, reflecting steady demand for US Treasuries. Natural gas storage declined by 100B, exceeding expectations and potentially influencing broader energy markets.

Looking ahead, markets are eyeing Friday’s core retail sales report, with expectations of a 0.3% rise. A weaker-than-expected figure could pressure the dollar, while stronger data may reinforce Fed hawkishness. Additionally, comments from FOMC members could provide further insight into potential monetary policy shifts in the coming months.

US Dollar Index (DXY) – Technical Analysis

The Dollar Index (DXY) is trading at 106.976, edging slightly lower as it remains below the key pivot point of 107.185. A continued dip below this level indicates bearish sentiment, with immediate support at 106.697 and further downside potential toward 106.358 if selling momentum picks up.

The 50-EMA at 107.731 and the 200-EMA at 108.054 act as overhead resistance, capping potential recovery attempts. Market participants are watching for signals from upcoming U.S. retail sales data, as a stronger-than-expected print could bolster the greenback.

A sustained break above 107.185 could shift momentum toward 107.573, while failure to hold current levels may accelerate losses.

GBP/USD Technical Analysis

The GBP/USD pair is trading at 1.25716, slightly up by 0.01%, as it tests the pivot point at 1.25505. A sustained move above this level signals potential upside, with immediate resistance at 1.26010 and a stretch target near 1.26635.

The 50-hour EMA at 1.24718 supports a bullish bias, while the 200-hour EMA at 1.24262 indicates a solid longer-term foundation. The pound’s resilience stems from mixed U.S. economic data and ongoing inflationary concerns.

However, traders remain cautious ahead of upcoming retail sales figures, which could shift market sentiment. If the pair slips below 1.25505, expect selling pressure to intensify, with immediate support at 1.24958 and a deeper floor at 1.24079.

EUR/USD Technical Forecast

The EUR/USD pair is trading at 1.04701, showing a slight uptick of 0.01% as it hovers near the pivotal 1.04470 level. A sustained move above this mark could fuel further gains, with the next resistance targets at 1.04965 and 1.05325.

The 50-hour EMA, currently at 1.03937, supports a bullish outlook, while the 200-hour EMA at 1.03755 reinforces a longer-term upward bias.

The euro’s strength is partly driven by a weakening dollar following softer PPI data, which suggests inflation may be stabilizing. However, a break below 1.04470 could invite selling pressure, potentially driving the pair toward the immediate support of 1.04107 and lower at 1.03807.