EUR/USD Technical Outlook: DXY Strength, Fed Focus and SMC Setup
- The US Dollar gained strength after firmer inflation data increased focus on Federal Reserve policy expectations.
- EUR/USD and GBP/USD pulled back from recent highs as market sentiment shifted.
- USD/JPY remained in focus as traders monitored potential Bank of Japan policy changes.
- EUR/USD showed a possible bullish continuation structure after a short-term swing high break on the 4-hour timeframe.
Market Overview
The forex market experienced notable movement during the reporting period, driven by economic data, central bank expectations, and changing sentiment across major currency pairs. Firmer inflation prints in the United States supported US Dollar strength and increased speculation around future Federal Reserve policy decisions.
Market focus remained on key currency pairs such as EUR/USD, GBP/USD, and USD/JPY. Traders also continued to monitor potential policy adjustments from the Bank of Japan, which kept USD/JPY in focus during the same period.
Major Currency Pair Performance
EUR/USD: The EUR/USD pair retreated from recent peaks as market sentiment shifted and traders adjusted positioning around the US Dollar outlook.
GBP/USD: Similar to EUR/USD, GBP/USD also moved lower from recent highs amid changing economic expectations and broader Dollar strength.
USD/JPY: USD/JPY remained an important pair to watch as traders monitored the Bank of Japan’s policy direction and its possible impact on the Japanese yen.
EUR/USD Technical Outlook on SMC
From the daily view, EUR/USD broke a swing low and is now retracing to the upside, targeting a higher-timeframe point of interest. This type of retracement is important because price often returns to key liquidity or imbalance areas before choosing the next directional move.
On the 4-hour timeframe, price broke a short-term swing high, which indicates possible bullish continuation in the near term. However, there are two short-term POIs below the recent price area. Price may retest those POIs before continuing higher.
USD Index DXY Performance
The USD Index DXY showed strength during the reporting period and moved above the important 103.00 level. This bullish momentum was supported by changing expectations around Federal Reserve policy and the timing of potential interest rate cuts.
A stronger DXY often creates pressure on EUR/USD and GBP/USD because both pairs trade directly against the US Dollar. For this reason, traders should monitor whether DXY holds above key levels or starts to lose momentum.
Upcoming Economic Events
March 18: The NAHB Housing Market Index is scheduled for release, giving traders insight into US housing market sentiment and activity.
March 19: Building Permits and Housing Starts reports are expected, offering further clarity on the outlook for the US housing sector.
March 20: The Federal Reserve is scheduled to hold its policy meeting, followed by a press conference from Chair Jerome Powell. Market participants will watch closely for policy guidance, rate expectations, and comments on inflation.
Source: Forex Factory
Analysis and Outlook
Looking ahead, forex traders should continue to monitor upcoming US economic events, housing data, and the Federal Reserve meeting. These events can influence market sentiment, US Dollar direction, and short-term movement across major currency pairs. For more updates across major pairs, visit our latest forex analysis hub.
For EUR/USD, the key focus remains on how price reacts around the higher-timeframe POI and short-term retracement zones. If price holds above the recent 4-hour structure and respects the lower POIs, bullish continuation remains possible. If the pair loses structure and fails to hold the retracement area, EUR/USD can face renewed downside pressure.
Conclusion
EUR/USD is trading in an important technical area while the US Dollar remains supported by inflation data and Federal Reserve expectations. The 4-hour structure suggests possible bullish continuation, but traders should wait for price reaction around the short-term POIs before making any directional decision.
The better approach is to avoid chasing price. Wait for liquidity to be taken, watch how price reacts around the POI, and use proper risk management before entering any trade.
Editorial Note: This analysis is based on technical price structure, liquidity zones, central bank expectations, and economic events available at the time of publication.
Risk Disclaimer: This analysis is for educational purposes only and does not constitute financial advice. Forex trading involves risk, and past analysis does not guarantee future results. Always trade with proper risk management.