U.S. Dollar Retreats as Taiwan Deal Bets Strengthen TWD: Analysis For EUR/USD, GBP/USD

Market Overview

The U.S. Dollar Index (DXY) is under pressure following a 5% appreciation in the Taiwan Dollar (TWD), driven by rising expectations of a bilateral trade agreement between Taiwan and the United States. Anticipated economic benefits from the deal have strengthened the TWD and shifted currency flows in its favor.

As a result, the Dollar’s position has weakened against a basket of peers. The Japanese Yen (JPY) and Australian Dollar (AUD) have seen increased demand, supported by their perceived stability and comparatively resilient economic outlooks.

Dollar Adjusts to Trade Developments and Domestic Data

Investors are adjusting their Dollar exposure amid signs of progress in U.S.–Taiwan negotiations. Statements from U.S. officials have raised expectations for a deal, which in turn has reinforced TWD strength. The JPY and AUD have gained amid this realignment, serving as preferred alternatives in the current environment.

Despite the Dollar’s recent decline, recent U.S. economic data has offered modest support. The ISM Services PMI rose to 51.6 in April, up from 50.8 in March, pointing to continued expansion in the services sector. Along with a stronger-than-expected jobs report last week, this has temporarily eased recession concerns.

Tariff Uncertainty Continues to Undermine the Dollar

Trade policy remains a source of uncertainty. President Donald Trump has reiterated his intention to impose new tariffs, including a 100% duty on foreign-produced films and upcoming measures targeting pharmaceuticals.

Treasury Secretary Scott Bessent noted that several trade agreements are nearing completion, though no timelines were offered.

Meanwhile, the decision not to meet with Chinese President Xi Jinping and the ongoing review of U.S. trade proposals by China’s Commerce Ministry add further ambiguity.

While recent developments suggest the potential for progress, unresolved trade risks continue to influence sentiment and limit near-term confidence in the Dollar.

US Dollar Index (DXY) – Technical Analysis

The U.S. Dollar Index is trading near $99.54, just above a rising trendline established in late April. This area coincides with horizontal support at $99.39. A sustained move below that level could expose the next downside targets at $98.90 and $98.47. On the upside, the immediate pivot is located at $99.77, with resistance levels at $100.28 and $100.64.

The 50-period EMA at $99.74 is acting as near-term resistance, while the 200 EMA remains out of frame, suggesting no clear long-term direction. Price action reflects ongoing indecision, with the index fluctuating around its support zone.

If the index holds above $99.39, short-term stability may persist. However, a breakdown below this level would signal growing downside risk, particularly if momentum builds toward $98.90.

GBP/USD Technical Analysis

The British pound is trading around $1.3331, having moved above a descending channel that defined price behavior since late April. This breakout coincides with a push above the 50-period EMA at $1.3306, reinforcing the current upward bias.

The pivot area near $1.3307 now acts as short-term support. Immediate resistance is seen at $1.3374, with additional barriers at $1.3444 and $1.3498. A drop below $1.3300 would shift attention to $1.3249 and $1.3202 as the next support zones.

While the broader structure favors buyers, confirmation through a sustained close above recent highs is still needed. A stable position above $1.3307 would increase the likelihood of a move toward $1.3374 in the near term.

EUR/USD Technical Forecast

The euro is trading near $1.1346 after moving above a descending trendline that had limited gains since mid-April. The pair also broke through the 50-period EMA at $1.1329, which now acts as initial support.

The pivot level at $1.1334 is critical for maintaining the current upward structure. Resistance levels are located at $1.1422, $1.1480, and $1.1544. If the euro fails to hold above $1.1334, downside targets include $1.1264 and $1.1210.

While the recent breakout signals a shift in momentum, further confirmation will depend on the formation of a higher low above the pivot. Sustained trade above $1.1334 would increase the probability of a move toward $1.1422 in the short term.