USD Weekly Outlook: Inflation Data and Wave Analysis

US Dollar Market Overview

The US dollar has sustained a period of strength, yet market participants are now evaluating the potential for a cyclical shift. Technical analysis of the EUR/USD pair suggests the completion of a five-wave bearish sequence, indicating a possible transition toward a bullish corrective phase.

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Economic data remains a primary focus for the dollar. While recent reports have seen limited market impact, the upcoming May inflation release is expected to serve as a significant catalyst. Markets anticipate an increase in both headline and core inflation figures, which may influence Federal Reserve policy expectations.

Inflationary Impact and Geopolitical Risks

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Should actual inflation figures exceed forecasts, the US dollar may find renewed support as hawkish policy expectations harden. Market participants should also monitor Thursday's Producer Price Index (PPI) report, as higher production costs often serve as a leading indicator for consumer inflation and potential USD strength.

Geopolitical developments continue to influence currency valuations. While the USD maintains its safe-haven status, potential improvements in regional conflicts, particularly in the Middle East, could shift investor sentiment toward the euro and pound. Absent such developments, the dollar remains largely driven by macroeconomic data.

Technical Outlook: EUR/USD and GBP/USD

The EUR/USD appears to have concluded a downward trend segment after testing the 1.1513 support level, corresponding to the 76.4% Fibonacci retracement. This technical setup presents a potential opportunity for long positions, with bullish targets positioned near the 1.17 level and beyond.

The GBP/USD structure currently indicates a three-wave downward correction, which may precede a broader bullish trend. This suggests a potential alignment in the recovery of both major currency pairs. Traders are reminded that these projections require risk management and the use of protective stop-loss orders.

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