U.S. Dollar Strength Dominates the Market
The U.S. Dollar is building on its recent gains as traders continue to unwind short positions following the latest Federal Reserve interest rate decision. The overall market sentiment is fueling a significant rebound, putting pressure on major currencies across the board.
The U.S. Dollar Index (DXY), a key barometer of the dollar's strength, has successfully breached the previous resistance zone of 97.10–97.30. Currently, it is attempting to establish a firm foothold above the 97.50 level. A decisive move above this mark would signal further bullish momentum, opening the path towards the next significant resistance area between 98.00–98.20.
EUR/USD Tests Critical Support at 1.1750
The EUR/USD pair is losing ground, largely driven by disappointing economic data from Germany. The latest Producer Prices report revealed a year-over-year decline of −2.2 in August, which was significantly weaker than the analyst forecast of −1.7. This data points to potential deflationary pressures in the Eurozone's largest economy.
From a technical standpoint, if EUR/USD remains below the crucial 1.1750 level, it is likely to continue its downward trajectory. The next major target for sellers will be the support zone located between 1.1685–1.1700.
GBP/USD Retreats as UK Budget Deficit Concerns Loom
Despite a better-than-expected UK Retail Sales report, GBP/USD remains under significant pressure. Retail sales showed a healthy increase of +0.5 month-over-month in August, surpassing the consensus forecast of +0.3.
However, traders appear to be overlooking this positive data, focusing instead on growing concerns about the UK's budget deficit. This underlying fiscal worry is currently outweighing the strong consumer spending figures. A successful test of the support at 1.3485–1.3500 would confirm further weakness and could push GBP/USD down towards the next support level at 1.3335–1.3350.
USD/CAD Pulls Back After Strong Canadian Retail Sales
In a move counter to the broader trend, USD/CAD has pulled back as the Canadian dollar shows strength. The catalyst for this move was an impressive Retail Sales report from Canada. The data indicated a +1.0 month-over-month increase in August, more than doubling the analyst consensus of +0.4.
This robust economic print has provided a significant boost to the Loonie. Should USD/CAD fail to reclaim the 1.3800 level, the pair will likely head lower to test the key support area between 1.3735–1.3750.
USD/JPY Consolidates Near 148.00 as BoJ Stays Pat
The USD/JPY pair is trading in a tight range with little directional momentum. The primary focus for traders was the Bank of Japan's (BoJ) Interest Rate Decision. As widely anticipated, the BoJ left its key interest rate unchanged at 0.5.
The lack of any monetary policy surprises has resulted in consolidation for the pair. The critical resistance level to watch is the 147.50–148.00 zone. A breakout above this area would be a strong bullish signal, potentially pushing USD/JPY towards the next major resistance level at 151.00–151.50.
For a comprehensive look at all of today’s economic events that could impact these currency pairs, be sure to check our economic calendar.
