U.S. Dollar Retreats as CPI Data Looms, Trade Uncertainty Builds – Analysis For EUR/USD, GBP/USD

Market Overview

The US Dollar Index (DXY), which measures the dollar’s strength against a basket of six major currencies, is under pressure, trading near $101.60. Investors are focused on April’s Consumer Price Index (CPI) release.

Headline inflation is projected to rise by 0.3% month-over-month, up from –0.1%, while Core CPI is also expected to increase to 0.3%.

Trade Talks Add Volatility to Dollar Sentiment

Recent progress in US-China trade negotiations has created mixed sentiment. Both sides cited “substantial progress” after two days of talks, with China’s Vice Premier He Lifeng calling it “an important first step.”

The discussions targeted a $400 billion trade imbalance. US officials welcomed the dialogue but warned that renewed tariffs could return if no final agreement is reached—adding pressure to the dollar and supporting gold prices.

Fed’s Rate Uncertainty Compounds Dollar Weakness

The Federal Reserve kept interest rates steady at 4.25%–4.50% last week, but signaled concern about rising inflation and labor market strain.

Chair Jerome Powell highlighted trade-related risks and indicated that future rate hikes may be approached cautiously.

Uncertainty around inflation and global trade remains a drag on the dollar heading into today’s CPI release.

US Dollar Index (DXY) – Technical Analysis

The U.S. Dollar Index (DXY) is trading at $101.54 on the 4-hour chart after easing from the $101.97 resistance level. Price remains within a rising channel, holding just above the pivot point at $100.86. The immediate support lies at $100.35, with a stronger floor at $99.67.

On the upside, $101.97 is the next hurdle, followed by $102.67. The 50 EMA sits at $100.41 and is sloping upward, reinforcing bullish short-term momentum. There’s no 200 EMA visible on this chart, but the structure suggests buyers remain in control as long as price stays above the pivot.

A clean break above $101.97 could open the door to further gains, while a drop below the channel support would challenge the current trend.

GBP/USD Technical Analysis

GBP/USD is trading near $1.3214 after bouncing off support at $1.3141, where price briefly dipped before recovering. The pair remains within a descending channel, but the recent rebound hints at a short-term correction.

Immediate resistance stands at $1.3257, with the 50 EMA slightly above at $1.3251, which could act as a cap. A break above this zone may open the path toward $1.3319.

On the downside, if $1.3141 fails, next support is seen at $1.3097. Until the pair breaks out of the channel, upside moves may remain limited, though momentum is building for a potential retest of the upper trendline.

EUR/USD Technical Forecast

The EUR/USD is trading around $1.1115 after bouncing from support near $1.1065, where price met both a key horizontal level and an ascending trendline. The short-term bias remains cautious with the 50 EMA above price at $1.1206, indicating a bearish tilt unless reclaimed.

Immediate resistance lies at $1.1182, followed by $1.1274. If buyers fail to defend the $1.1065 zone, the next downside target is $1.0997.

While price is trying to stabilize, any upward move needs confirmation above $1.1180 to suggest a recovery toward the broader descending channel’s upper bound. Until then, rallies may face pressure.