U.S. Dollar Index
Since the beginning of 2025, key “hard data” such as U.S. consumption and investment, which had previously been resilient, have started to decline, signaling a strong indication that the U.S. economy is on a downward trend. Meanwhile, inflation in the U.S. remains sticky. After hitting a phase low of 2.4% in October last year, inflation has shown signs of rebounding.
In February, the ISM Prices Paid Index saw a significant jump: the manufacturing index rose to 62.4, while the services index reached 62.6, both exceeding the 60 thresholds. As a result, the market is now focused on the upcoming Federal Reserve meeting on March 19, where the wording of statements from Fed officials will be closely analyzed.
- Last week, the U.S. Dollar Index (DXY) traded weakly in a sideways consolidation, with bearish momentum still dominating.
- This week, attention is on the downward movement of the index after facing resistance. The key level to watch is 104.36.
- If the index trades below 104.36, key support levels to monitor are 101.85 and 100.53.
- If the index stabilizes and rebounds above 104.36, watch for the strength of the recovery, with resistance levels at 105.56 and 107.40.
EUR/USD
Germany’s ruling coalition has reached an agreement on a €500 billion infrastructure fund and reforms to borrowing rules, which is expected to be approved by parliament this week. This move strengthens expectations of fiscal expansion in Germany. Combined with the hawkish stance of the European Central Bank (ECB), which is expected to keep rates unchanged in April, the euro’s short-term appeal has significantly increased.
- EUR/USD surged to a key resistance level at 1.0940 before facing selling pressure and pulling back, but overall bullish momentum remains strong.
- This week, traders should watch the euro’s pullback strength and potential buying opportunities, with the key level at 1.0940.
- If EUR/USD struggles to hold 1.0940, support levels to watch are 1.0778 and 1.0632.
- If EUR/USD stabilizes and breaks above 1.0940, the pair could see further upside, with key resistance levels at 1.1143 and 1.1484.
USD/JPY
Japanese companies have agreed to a 5.46% wage increase, the highest in 34 years. However, the market broadly expects the Bank of Japan (BOJ) to keep its monetary policy unchanged in this week’s meeting. While wage growth supports inflation, the BOJ’s cautious assessment of global risks has kept the yen under pressure. Meanwhile, rising U.S. inflation expectations have fueled further demand for U.S.-Japan interest rate differential trades.
- Last week, USD/JPY dipped to 146.44 before stabilizing and rebounding, forming an initial technical recovery.
- This week, the key pivot level to watch is 146.44.
- If USD/JPY holds above 146.44, watch for the strength of the rebound, with resistance levels at 149.24 and 152.05.
- If USD/JPY fails to hold above 146.44 and breaks lower, it could open up further downside potential, with support levels at 144.01 and 140.33.
Market Outlook
- Key Event to Watch: March 19 Federal Reserve meeting
- EUR/USD bullish outlook continues, but faces resistance at 1.0940
- USD/JPY remains driven by U.S.-Japan rate differentials
Stay tuned for more updates on market trends and key trading opportunities!
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