U.S. Dollar Tests Key Support as Geopolitical Risks Rise – Analysis for EUR/USD, GBP/USD

Market Overview

The US Dollar Index (DXY) traded near $99.42 in the early European session, struggling to find direction as traders await the Federal Reserve’s policy meeting. Investors are focused on potential signals about future interest rate decisions, with the DXY holding near key support as the Fed’s stance remains uncertain.

Trade Talks Add to Dollar Pressure

Market sentiment was also influenced by US-China trade talks, with US Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer set to meet Chinese officials in Switzerland.

This is the first formal dialogue since the US imposed tariffs on Chinese goods, adding a layer of uncertainty for the dollar.

Geopolitical Tensions Keep Dollar Volatile

Geopolitical risks, including tensions in Ukraine and the Middle East, are adding further volatility to the dollar.

Additionally, economic uncertainty surrounding global trade disputes and rising tariffs continues to weigh on investor sentiment, keeping the dollar under pressure as traders seek safer assets.

US Dollar Index (DXY) – Technical Analysis

The U.S. Dollar Index (DXY) is trading around $99.416, holding above a key pivot point at $99.183. The index recently tested this support level, aligning with a rising trendline that has provided a solid base for the recent uptrend. Immediate resistance sits at $99.645, with the next major barrier around $100.055.

A break above this zone could open the door to $100.378, a significant psychological level. On the downside, a drop below the $99.183 pivot could expose the index to a deeper pullback, with the next support around $98.901 and further downside potential to $98.561.

The DXY remains in a cautious recovery phase, with traders watching for a break above $99.645 to confirm bullish momentum. Failure to hold above $99.183 could signal a deeper correction.

GBP/USD Technical Analysis

GBP/USD is trading around $1.3347, struggling to hold above the 50-day Exponential Moving Average (EMA) at $1.3325, which has provided critical short-term support. The pair recently tested resistance at $1.3396 but failed to sustain gains, pulling back toward the $1.3337 support zone.

Immediate resistance is at $1.3396, with the next key barrier at $1.3441. On the downside, a drop below $1.3325 could expose the pair to a deeper correction toward $1.3260, a key level aligning with the lower trendline.

GBP/USD needs a break above $1.3396 to resume its uptrend, while a drop below $1.3325 could signal a deeper correction.

EUR/USD Technical Forecast

EUR/USD is trading around $1.1360, recovering from recent lows and breaking above the 50-day Exponential Moving Average (EMA) at $1.1337, which now acts as immediate support. The pair is testing a descending trendline from mid-April, with the next resistance at $1.1418, followed by a significant barrier at $1.1476.

A breakout above these levels could target $1.1532, a key swing high.
On the downside, a drop below $1.1337 could expose the pair to a retest of $1.1274, a recent consolidation area, with further support around $1.1235.

EUR/USD needs a clear break above $1.1418 to confirm bullish momentum, while a drop below $1.1337 could risk deeper losses.