Dollar Slips Ahead of Fed Decision: Analysis For EUR/USD, GBP/USD, USD/CAD, USD/JPY

Dollar Retreats as Fed Cut Nears; EUR, GBP Advance While CAD, JPY Hold Mixed Signals

The U.S. dollar softened on Thursday as hotter-than-expected inflation data was overshadowed by a sharp rise in jobless claims, reinforcing expectations that the Federal Reserve will cut rates at next week’s FOMC meeting. With markets pricing in a 94% probability of a 25 bps cut, the dollar index (DXY) slipped 0.2% to 97.57. Weak labor data and stabilizing core inflation are driving market sentiment, pulling the dollar lower across most major pairs.

Euro (EUR/USD)

The euro climbed 0.3% to 1.1731, supported by broad dollar weakness and technical strength. Eurozone sentiment data remains fragile, but EUR/USD has found support above the 50-day SMA (1.17), suggesting buyers are active on dips. The pair recently rebounded from a local low at 1.16082 and posted a swing high at 1.17801. The 50-day moving average continues to provide dynamic support, and a sustained break above 1.1750 would expose the 1.18 level. With the Fed easing and euro positioning improving, the near-term outlook for EUR/USD is mildly bullish.

British Pound (GBP/USD)

Sterling rebounded to 1.3570, gaining 0.3% as investors favored currencies tied to steady or tightening central banks. With the Bank of England expected to keep the Bank Rate unchanged at 4.00% next week, the GBP has gained on rate divergence. GBP/USD is trading firmly above both the 50-day SMA (1.3) and the 200-day SMA (1.3083), signaling a strong technical base. Recent price action has challenged the 1.35950 resistance level, and a break above this could accelerate gains toward 1.3650. Given the supportive rate outlook and strong chart structure, the pair’s outlook is bullish in the short term.

Canadian Dollar (USD/CAD)

USD/CAD dipped to 1.3837 despite hot U.S. CPI, as rising jobless claims weighed on the dollar. The loonie bounced from 1.3727 earlier in the week, but remains capped below the recent swing high of 1.3925. Price action is contained between the 50-day SMA (1.4) and the 200-day SMA (1.4019), suggesting indecision. While Canadian data remains soft and recession risks linger, the CAD benefited from weaker U.S. yields. The pair may remain range-bound near-term. Given technical resistance and limited domestic momentum, USD/CAD’s outlook is neutral to slightly bearish.

Japanese Yen (USD/JPY)

The yen held steady around 147.28, despite U.S. yields dipping and Prime Minister Ishiba’s resignation adding political risk. USD/JPY remains technically compressed between the 50-day SMA (147.6) and the 200-day SMA (148.72). Recent price action shows rejection near the upper trendline, with the pair testing support after slipping under the 50-day SMA. If the pair breaks below 147.00, downside pressure could intensify. With Japanese fundamentals still weak but political uncertainty rising, the short-term outlook for USD/JPY is slightly bearish.

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