U.S. Dollar Loses Ground After Fed Officials Flag Weak Confidence – Analysis For EUR/USD, GBP/USD

Market Overview

The US Dollar Index (DXY) fell to around $99.92 during Wednesday’s Asian session, marking its third consecutive daily decline. The drop reflects mounting pressure on the dollar following cautious remarks from Federal Reserve officials.

San Francisco Fed President Mary Daly and Cleveland Fed President Beth Hammack noted rising concerns over business and consumer confidence, despite solid headline data. They cited policy uncertainty and weakening sentiment as key risks.

While no Fed official has endorsed immediate rate cuts, Atlanta Fed President Raphael Bostic backed one rate cut in 2025, citing lingering effects of past trade disruptions.

Moody’s Downgrade Intensifies Fiscal Concerns

Moody’s recent downgrade of the US credit rating from Aaa to Aa1 further dampened dollar sentiment. This follows previous downgrades by Fitch (2023) and S&P (2011).

Moody’s projects federal debt will reach 134% of GDP by 2035, up from 98% in 2023, driven by higher interest costs, growing entitlement spending, and falling revenues.

The budget deficit is expected to near 9% of GDP. These challenges may continue to erode investor confidence in US assets and weigh on the dollar’s medium-term outlook.

US Dollar Index (DXY) – Technical Analysis

The U.S. Dollar Index (DXY) has broken decisively below the $99.92 support zone, now trading around $99.50 with bearish momentum picking up. This drop follows a rejection from the descending trendline and the 50-EMA ($100.46), which has acted as dynamic resistance for much of May.

The 200-EMA at $100.86 continues to slope downward, reinforcing the longer-term bearish bias. With price now below both EMAs and former horizontal support, the next key levels to watch are $99.17 and $98.68.

A close below $99.17 could trigger further downside into $97.94. Unless bulls can reclaim $99.92 quickly, the technical structure suggests continued weakness, especially amid broad risk-on sentiment and softer U.S. macro data.

GBP/USD Technical Analysis

GBP/USD is trading near $1.3456 after breaking through the key $1.3403 resistance, backed by a strong bullish impulse and support from the ascending trendline. The breakout is supported by both the 50-EMA ($1.3346) and 200-EMA ($1.3297), which are rising in parallel, reinforcing the current uptrend.

Price has now cleared a multi-session consolidation range and is making higher highs and higher lows, pointing to trend continuation. The next resistance to watch lies at $1.3529, followed by $1.3567.

On the downside, $1.3443 now serves as immediate support, and if violated, could trigger a retest of the $1.3403 breakout level. Momentum remains strong, and bulls are in control unless price slips below the trendline or $1.3400 zone.

EUR/USD Technical Forecast

EUR/USD has broken decisively above a multi-week descending trendline, currently trading around $1.1343. This breakout follows a sharp rally from the $1.1222 region, backed by strong bullish candles and a reclaim of both the 50-EMA ($1.1237) and 200-EMA ($1.1197).

The move confirms a structural shift, with price clearing prior resistance at $1.1318, which now turns into near-term support. Momentum is clearly with the bulls, and if price sustains above this zone, the next upside targets sit at $1.1377 and $1.1425.

Any pullback toward $1.1318–$1.1300 could offer a retest entry. A failure to hold this breakout would question the breakout’s strength, but as of now, price action favors continued strength into resistance levels unseen since April.