U.S. Dollar Retreats as Traders Await Retail Sales and PPI Data – Analysis For EUR/USD, GBP/USD

Market Overview

During early Thursday trading, the U.S. Dollar Index (DXY) edged down to 100.90, as markets turned cautious ahead of upcoming Retail Sales and Producer Price Index (PPI) data. The greenback remains under pressure from easing global trade tensions and a softer outlook on Federal Reserve rate cuts.

Trade Optimism and China Data Weigh on the Dollar

Improved U.S.-China relations have lifted risk sentiment and reduced safe-haven demand for the dollar. President Trump recently described ties with China as “excellent” and signaled readiness for direct talks with President Xi.

Meanwhile, China’s April CPI fell 0.1% YoY, and PPI dropped 2.7%, reinforcing global disinflationary trends.

Fed Policy Expectations Shift as Inflation Softens

Market pricing now sees a 74% chance of a 25 bps Fed cut in September, down from earlier July forecasts. April U.S. CPI rose 2.3% YoY, while core inflation remained stable at 2.8%, aligning with expectations.

This week’s data will be pivotal in shaping near-term dollar direction and Fed policy expectations.

US Dollar Index (DXY) – Technical Analysis

The U.S. Dollar Index (DXY) is trading around 100.69, struggling to break above the descending trendline and the 50-hour EMA at 100.93. After peaking near 101.97, the index has formed lower highs, indicating continued short-term bearish momentum.

Attempts to reclaim the 101.00 level were rejected, reinforcing resistance just below 101.26. On the downside, immediate support lies at 100.26, with further downside risk toward 99.84 and 99.48 if that level fails.

The overall structure favors sellers unless the dollar can close decisively above 101.26, which could shift momentum.

GBP/USD Technical Analysis

The GBP/USD pair is currently trading at 1.32872, holding just above a rising trendline and the 50-hour EMA at 1.32778. After briefly touching 1.3304, price pulled back, indicating some profit-taking or renewed dollar strength. Despite this, the bullish structure remains intact as long as the pair stays above the 1.3260 support level.

If GBP/USD can regain momentum and close above the 1.3300 psychological barrier, it may retest the recent high near 1.3360, followed by 1.3404. On the downside, a break below 1.3260 would expose 1.3199, a key horizontal support.

With the ascending trendline still in play and price stabilizing above the 50-EMA, short-term bias remains cautiously bullish unless key supports break.

EUR/USD Technical Forecast

The EUR/USD pair is currently trading at 1.12048, after briefly testing the upper boundary of a symmetrical triangle pattern. Price action shows signs of indecision following a sharp rally that was quickly faded from the 1.1266 resistance, indicating seller interest near that level.

The pair is now holding just above the ascending trendline and the 50-hour EMA at 1.11875, which have been acting as dynamic support. A sustained break above the triangle’s resistance could open the door toward 1.1335 and potentially 1.1380, while a breakdown below 1.1190 may expose 1.1135 and 1.1072 next.