The US dollar finished the week with a two-day rally of over one percent, erasing all of Wednesday’s FOMC-driven losses.
Today’s Weekly Forex Forecast focuses on what last week’s strength in the US Dollar Index (DXY) means for the EURUSD, GBPUSD, USDCAD, and XAUUSD.
Let’s begin!
US Dollar Index (DXY) Forecast
The DXY finished the week with a strong bullish move to the 104.45 resistance, wiping out all of Wednesday’s FOMC-driven losses.
Dollar bulls still have work to do next week, given Friday’s close below resistance.
However, the DXY cleared the diagonal resistance from November 1st that intersects near 104.00 next week.
That means 104.00 flips to support, with 104.45 as resistance early next week.
A sustained break above 104.45 exposes 105.00 and 106.00.
A daily close below the 103.60 to 103.80 region would change my bullish bias.
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EURUSD Forecast
The EURUSD broke down in dramatic fashion last week following a liquidity sweep during Wednesday’s FOMC.
While the breakdown may seem innocent from the EURUSD perspective, the real damage was done to the Euro Index (EXY) chart.
I discussed the multi-year triangle last week, which broke down with last week’s euro weakness.
As long as the breakdown holds, I’m targeting lower levels, including 1.0730 and the 1.0635 weekly level.
GBPUSD Forecast
GBPUSD ended the week with a close back inside the descending channel from July 2023.
That close flips 1.2640 to new resistance and confirms the March rally as a fakeout.
Fakeouts to one side of a pattern often trigger extended moves in the opposite direction.
With that in mind, shorts are favorable, while GBPUSD remains below the 1.2640 region with targets of 1.2535 and 1.2490.
Alternatively, a sustained break above 1.2640 would turn GBPUSD higher toward 1.2700.
USDCAD Forecast
USDCAD remains sideways, capped by the 1.3600 to 1.3650 resistance area.
We’ve seen the pair trade in an ascending range all year following the bullish reclaim on January 3rd that I wrote about several times.
Despite the sideways movement, recent US dollar action combined with the January (bullish) fakeout has me watching for a sustained break above the 1.3600 to 1.3650 region.
That would expose the next key resistance near 1.3750, followed by the 1.3870 macro resistance level.
XAUUSD (gold) Forecast
XAUUSD surged to a new all-time high following last week’s FOMC, as the US dollar sold off aggressively.
However, the rally didn’t last long, and gold eventually closed Thursday and Friday below that previous $2,195 high.
That said, XAUUSD remains above the $2,140 December high, a must-hold level for gold bulls.
If XAUUSD were to drop below that on a daily closing basis, a retest of $2,075 would seem likely.
For now, XAUUSD is range-bound between $2,140 support and $2,195 resistance.
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