U.S. Dollar Retreats From One-Week Low as Traders Weigh Fed Rhetoric – Analysis For EUR/USD, GBP/USD

Market Overview

In early Asian trading on Tuesday, the US Dollar Index (DXY) hovered near 100.25, holding close to Monday’s one-week low. Persistent selling pressure reflects limited demand and a lack of economic support for the Greenback.

Soft US Data and Rating Downgrade Undermine Dollar

Recent US inflation readings—CPI and PPI—have reinforced expectations for Fed rate cuts in 2025. Weak retail sales data further signal slowing domestic demand, adding to the dollar’s vulnerability. Compounding concerns, the US government’s credit rating was downgraded on Friday, raising fresh doubts about fiscal stability.

Tariff Truce with China Offers Limited Support

Progress in US-China trade negotiations, including a 90-day pause on new tariffs, has helped reduce recession fears. This development has curbed aggressive bearish bets against the dollar, cushioning further downside.

With no major economic releases on Tuesday, attention turns to comments from Federal Reserve officials. Markets are watching for guidance on future policy, with any hawkish tone likely to influence short-term dollar direction.

US Dollar Index (DXY) – Technical Analysis

The U.S. Dollar Index (DXY) is currently testing a critical support area near $100.05, where the ascending trendline from April’s low converges with horizontal support. Price action has printed a mild break below this level, hinting at possible bearish continuation. Notably, the 50-EMA at $100.62 now acts as resistance, having capped recent recovery attempts.

Technically, DXY remains trapped inside a descending triangle, characterized by lower highs and flat support, often a bearish formation.

A sustained breakdown below $100.00 could expose downside targets at $99.55 and $99.17. However, if bulls reclaim the $100.40–$100.62 zone, a relief rally toward $101.25 is possible.

GBP/USD Technical Analysis

GBP/USD is trading near $1.3391 after testing resistance at $1.3403. The pair continues to hold a strong uptrend supported by a rising trendline and the 50-EMA ($1.3319), which is sloping upward. Price recently broke above $1.3344, flipping it into near-term support, and has formed higher lows since May 13.

If bulls manage a clean breakout above $1.3403, the next resistance lies at $1.3442 and potentially $1.3482. However, failure to clear this level may trigger a pullback toward $1.3344.

EUR/USD Technical Forecast