US Dollar Forecast: Court Ruling on Fed Independence Stirs Dollar, GBP/USD and EUR/USD

Market Overview

The US Dollar Index (DXY) traded near 97.40 in early European trading Friday after the Federal Reserve delivered a widely expected 25-basis-point rate cut. Despite lowering borrowing costs, policymakers adopted a cautious tone, signaling no urgency for aggressive easing.

Fed Maintains Cautious Approach

Chair Jerome Powell described the move as a “risk-management cut” in response to labor market weakness but stressed that tariff-driven price pressures remain a risk.

He reiterated that policy will be decided on a “meeting-by-meeting” basis, reducing the likelihood of back-to-back cuts.

According to MUFG analyst Soojin Kim, “Investors judged the Fed’s guidance less dovish than anticipated. Powell highlighted tariff-driven inflation risks and stressed a ‘meeting-by-meeting’ approach, sending the dollar higher.”

Inflation Risks Support the Dollar

Markets interpreted Powell’s remarks as a signal that persistent inflation concerns outweigh pressure for rapid easing. Traders adjusted expectations accordingly, lending the greenback support against major currencies and limiting downside momentum.

Court Ruling Raises Concerns on Fed Independence

Political headlines added uncertainty as a court blocked President Donald Trump’s attempt to replace Fed Governor Lisa Cook, appointed under former President Joe Biden. The White House has accused Cook of mortgage fraud, though no charges have been filed and she denies wrongdoing.

The development raised fresh concerns over the Fed’s independence, with analysts warning that prolonged scrutiny of officials could erode confidence in monetary policy and weigh on investor sentiment.

US Dollar Index (DXY) – Technical Analysis

The U.S. Dollar Index (DXY) is stabilizing around 97.40 after bouncing from support near 97.05. The chart shows the index still moving inside a descending channel, though the latest rebound has carried price back toward the upper boundary. The 50-EMA at 97.20 is acting as immediate support, while the 200-EMA at 97.59 is capping upside momentum.

RSI sits near 62, suggesting improving strength without being stretched. A break above 97.60 could open room toward 97.78 and 98.08, but failure to clear resistance may keep the broader bearish structure in place.

Holding below 97.20 would risk another slide toward 96.55 and 96.20, aligning with the longer downtrend.

GBP/USD Technical Analysis

GBP/USD is trading near $1.3542, holding just above a key support zone at $1.3533–$1.3540 after a sharp pullback from recent highs. The pair has slipped below its 50-EMA at $1.3593, but the 200-EMA at $1.3545 is providing immediate support.

Price action shows consolidation around this demand area, with long lower wicks suggesting some buyer defense.

However, RSI is near 31, pointing to oversold conditions and leaving room for a potential bounce. A sustained move above $1.3570 could ease downside pressure, while failure to hold $1.3530 risks further losses toward $1.3490.

EUR/USD Technical Forecast

EUR/USD is trading near $1.1775, slipping below its recent ascending trendline after failing to hold gains above $1.1820. The pair is currently hovering between the 50-EMA at $1.1794 and the 200-EMA at $1.1735, highlighting a consolidating bias.

The RSI sits near 40, signaling weakening momentum after the recent pullback from highs around $1.1870. Immediate support rests at $1.1715, while a break lower could open the door toward $1.1660. On the upside, recovery requires reclaiming $1.1790 to re-test $1.1820.