Is the US dollar carving a higher low for the first time in 2025?
Get all of the details on the DXY, EURUSD, GBPUSD, USDJPY, and the Yen Basket of Currencies in today’s forecast. The GBPUSD analysis is a must-see.
US Dollar Index (DXY) Forecast
The DXY closed last week just above the 98.90 level, keeping bulls in the game for now.
However, the downtrend in 2025 remains intact. The DXY remains below its February descending trend line and the 100.20 handle.
So, although we could see the US dollar bottom here, bulls have work to do. Specifically, the DXY will have to break its February trend line and close a daily candle above 100.20.
Until then, there’s no change to the USD downtrend.
EURUSD Forecast
EURUSD has trended higher all year. However, the pace of the uptrend has slowed in recent weeks, leading to relatively choppy price action since May 12th.
Although the uptrend remains intact, the euro’s future direction is at a crossroads.
On the one hand, buyers remain in control, with the pair carving higher highs and lows. However, on the other hand, the recent repeated tests of the March trend line warrant caution.
If the EURUSD breaks its March trend line near 1.1340 next week, it will open up downside targets. But if the uptrend continues, a test of 1.1530 could be next.
I’m in no rush to trade the choppy price action, so I’ll wait to see what next week brings.
GBPUSD Forecast
GBPUSD remains in its 2025 uptrend, carving higher highs and lows. However, the price action over the last few months bears an eerie resemblance to the 2024 high.
With that said, there is no confirmation of a top just yet. As long as GBPUSD is above 1.3500 and 1.3430, the pair is trending higher.
If the pound falls below those levels on the high time frames, it could mark a significant top for GBPUSD. That would expose levels like 1.3200 and the 1.3050 imbalance.
On the other hand, a sustained break above 1.3630 would open up higher levels. But I would be skeptical of that, given the structure that has developed since April.
Another factor affecting the pound and the euro is the DXY. The dollar index will need to break its February trend line and 100.20 to signal a correction from the EURUSD and GBPUSD.
USDJPY Forecast
USDJPY is on my radar, but only if the yen basket of currencies (below) breaks below a key level. I discuss this more below, but for USDJPY, key resistance remains at 145.40, followed by 148.70.
The potential for the recent 142.00 low to become a higher low is present. However, we don’t have confirmation of that yet.
Other rules also apply when trading USDJPY. The yen basket chart needs to drop below a key level, and the DXY needs to break out for me to consider a long position in USDJPY.
For now, I’ll keep a close watch on USDJPY. However, other charts need to set up for me to consider trading the pair.
Japanese Yen Basket (JPYBASKET)
The Yen Basket of Currencies, or JPY Basket for short, is an appealing chart. It’s also a chart that’s overlooked by most traders, given how USDJPY is usually the center of attention.
However, the descending trend line on the weekly time frame from 2020 is incredibly well-defined. The index may also be approaching a weekly close below the level after breaking out earlier this year.
If it is confirmed, we could have a buy-side fakeout for the yen. That could introduce significant weakness for the JPY across the forex market.
The Yen Basket has already broken its 2024 ascending trend line, suggesting a weaker yen ahead. However, for the yen to weaken further, the JPY Basket needs to fall below its 2020 trend line, currently near 6,650, on a weekly closing basis.
