U.S. Dollar Rebounds as Confidence Jumps, Durable Goods Dip: Analysis For EUR/USD, GBP/USD

Market Overview

During the Asian session, the US Dollar Index (DXY) continued to climb, trading near 99.64 after gaining over 0.50% in the previous session. Strong US Consumer Confidence data underpinned the move, while investors remained cautious ahead of the Federal Open Market Committee (FOMC) minutes release later on Wednesday.

Confidence Data Backs Dollar While Durable Goods Signal Caution

The Conference Board’s Consumer Confidence Index rose sharply to 98.0 in May, up from 86.0 in April, signaling renewed optimism in the economy. However, Durable Goods Orders fell 6.3% in April, a smaller decline than anticipated, highlighting persistent caution in manufacturing.

Fiscal Risks Mount with Deficit Projections and Downgrades

Concerns over fiscal stability resurfaced as former President Trump’s “One Big Beautiful Bill” passed the Senate, adding $3.8 billion to the deficit. Moody’s downgraded the US credit rating to Aa1, forecasting federal debt at 134% of GDP by 2035, up from 98% in 2023.

With strong consumer sentiment offset by fiscal risks, traders are closely watching the upcoming FOMC minutes for cues on rate policies.

US Dollar Index (DXY) – Technical Analysis

The U.S. Dollar Index (DXY) is currently trading near 99.64, after rebounding from recent lows around 98.20. On the 2-hour chart, price action is approaching a key descending trendline, which continues to cap upward momentum.

The immediate resistance is marked at 100.12 and 100.60, where the confluence of the trendline and the 200-period EMA reinforces the barrier. Recent candles indicate hesitation, with small-bodied formations showing a tug-of-war between buyers and sellers.

Meanwhile, support levels are situated at 99.09 and 98.71. A decisive break above the trendline and 100.12 could confirm a short-term bullish reversal, targeting 101.15. However, failure to breach resistance may result in a pullback toward 99.09, and a break below could expose deeper levels around 98.27.

GBP/USD Technical Analysis

The GBP/USD pair is consolidating near 1.3496, maintaining an upward channel despite recent volatility. The 2-hour chart reveals the pair is clinging to trendline support at 1.3461, just above the 200-period EMA at 1.3389.

Resistance looms at 1.3521 and 1.3592, with the 50-period EMA offering near-term dynamic resistance. Candlestick patterns signal indecision, but momentum is cautiously bullish.

A close above 1.3521 could push GBP/USD higher, targeting 1.3592 and potentially 1.3659. Conversely, a drop below 1.3461 might see a pullback to 1.3399 or deeper toward 1.3333. Watch for a breakout or breakdown for the next big move.

EUR/USD Technical Forecast

The EUR/USD pair is holding steady near 1.1320, supported by an ascending trendline from recent lows. The 2-hour chart highlights a potential bounce scenario, with price action currently sandwiched between the 50-period EMA (1.1337) and 200-period EMA (1.1290).

Recent candles indicate indecision, but the trendline has held as dynamic support. A close above 1.1345 could fuel bullish momentum toward 1.1382 and 1.1418. Alternatively, a dip below the trendline could see the pair test 1.1302 and 1.1256.

Momentum is neutral to bullish, but a decisive breakout or breakdown is needed to confirm direction. Watch the EMAs and trendline for the next cue.