Dollar Under Pressure as Fed Rate Cut Looms: Analysis For EUR/USD, GBP/USD, USD/CAD, USD/JPY

U.S. Dollar Index (DXY)

The U.S. Dollar Index (DXY) held at 97.615, showing mild recovery after Thursday’s drop caused by weaker jobless claims data and sliding consumer sentiment. While Friday’s uptick was largely attributed to position-squaring, the broader outlook remains bearish. The Fed is widely expected to cut rates by 25 bps next week, potentially marking the start of a new easing cycle.

Technically, the DXY is trading below both its 50-day (98.121) and 200-day (102.186) SMAs, with resistance at 97.859 and support at 97.253. A break below this level could open the door toward 97.109 then 96.377, the July 1 bottom.

Forecast: Bearish, unless it reclaims the 50-day moving average, currently at 98.121.

EUR/USD

EUR/USD is trading steady near 1.17352, as the pair continues to benefit from dollar weakness and reduced ECB easing expectations. The ECB held rates at 2% for a second consecutive meeting, with President Lagarde stating the eurozone remains in a “good place.”

Technically, the pair is above its 50-day SMA (1.16595), with immediate resistance at 1.17801. The formation of higher lows since mid-August supports a bullish structure. Any sustained move above 1.17888 would pave the way toward 1.18299 and beyond.

Forecast: Bullish, with dips likely to find support near the 50-day moving average.

GBP/USD

Sterling trades at 1.35598, mildly lower on the day after data showed the UK economy stagnated in July. Nonetheless, the technical picture remains supportive. The pair is above both its 200-day SMA (1.30875) and testing the 50-day SMA (1.34645) from the upside. Resistance is near 1.35950, the recent swing high. Momentum favors the bulls, but lack of economic growth may limit upside unless dollar weakness persists.

Forecast: Bullish bias, while above the 50-day moving average.

USD/CAD

USD/CAD hovers at 1.38442, consolidating after testing resistance near 1.38924. The pair remains above the 50-day SMA (1.37669) and comfortably below the 200-day SMA (1.40176). With WTI crude stabilizing near recent highs, CAD gains have been limited. The pair has respected support at 1.37324, suggesting a range-bound setup. Any breach of 1.38924 could target 1.39248.

Forecast: Neutral-to-Bullish, while above the 50-day moving average.

USD/JPY

The USD/JPY stands at 147.672, supported by a firm U.S. Treasury yield backdrop and a lack of intervention threats from Japanese officials. Friday’s joint U.S.-Japan statement, affirming that FX rates should be market-determined, gave the pair breathing room. Technically, USD/JPY is attempting to break above the 50-day SMA (147.624), but the 200-day SMA (148.704) acts as a firm ceiling. Key support lies at 146.800; resistance at 149.138.

Forecast: Neutral, with possible upside if Treasury yields climb further.

More Information in our Economic Calendar.