US Dollar Forecast: Dollar Extends Losses Before ADP and ISM Data – GBP/USD and EUR/USD

Market Overview

During the early European session, the US Dollar Index (DXY) continued to slide toward 99.20, its weakest level since mid-November. The decline reflects growing confidence that the Federal Reserve will lower interest rates next week, keeping the dollar under sustained pressure and limiting any attempt at recovery.

Softer US Data and Dovish Fed Tone Drive Weakness

Recent US macroeconomic readings point to a gradual cooling in economic activity. While conditions remain broadly stable, employment and output indicators suggest softening demand. This has reinforced expectations that the Fed will ease policy sooner than previously expected.

Dovish remarks from several Fed officials have strengthened the case for a 25-basis-point rate cut at next week’s FOMC meeting. The CME FedWatch Tool now shows nearly a 90% probability of such a move, supporting non-yielding assets such as gold and weighing on the dollar.

Speculation surrounding the next Fed Chair has also influenced sentiment. Reports indicate that White House economic adviser Kevin Hassett, known for favoring lower interest rates, is a leading candidate. Markets interpreted this as another signal toward easier policy.

Geopolitical Tensions Offer Limited Support

Although geopolitical friction usually boosts safe-haven demand for the dollar, the effect has been muted. Reports of stalled discussions between Russia and US envoys and rising regional uncertainty failed to offset the dominant rate-cut narrative.

Markets Await Key US Data

Traders now turn to today’s ADP employment report and ISM Services PMI, followed by Friday’s PCE Price Index, the Fed’s preferred inflation measure.

US Dollar Index (DXY) – Technical Analysis

The Dollar Index is sliding deeper inside its descending channel, with price losing the 99.48 support and moving toward the mid-channel line. Both the 50-EMA and 200-EMA sit above current price, reinforcing downside pressure as they continue to slope lower. Recent candles show consistent lower highs and lower lows, signaling controlled selling rather than panic.

RSI sits near 32, approaching oversold territory but without a clear reversal signal. If the index breaks below 99.00, the next levels to watch are 98.76 and 98.56. For any recovery to gain traction, DXY must reclaim 99.48 and close above the 50-EMA, which would indicate a shift in short-term momentum.

GBP/USD Technical Analysis

GBP/USD is moving steadily inside an ascending channel, with price trading near $1.3237 after rebounding from support at $1.3221. The pair continues to print higher lows along the channel floor, showing consistent underlying demand. The 50-EMA at $1.3214 is holding as immediate dynamic support, while the 200-EMA near $1.3182 sits as a deeper cushion.

Price faces resistance at $1.3276, followed by $1.3325 if momentum improves. Recent candles show steady buying, but occasional upper-wick spikes signal supply near mid-channel.

RSI around 59 reflects building strength without entering overbought territory. A retest of $1.3220–$1.3200 could offer fresh bids. As long as GBP/USD holds the channel, the broader structure supports gradual continuation higher.

EUR/USD Technical Forecast

EUR/USD is climbing inside a well-defined ascending channel, with price trading near $1.1644 after breaking above minor resistance at $1.1604. Recent candles show steady higher lows and controlled bullish momentum along the channel’s lower trendline.

Price now sits above both the 50-EMA at $1.1606 and the 200-EMA at $1.1583, reinforcing short-term upward structure. The next resistance lies at $1.1654, followed by $1.1682 if momentum extends.

RSI is nearing 68, showing strengthening buying pressure but not yet stretched. A rejection near channel resistance could trigger a pullback toward $1.1604 or the channel floor around $1.1577. As long as EUR/USD holds inside the channel, the bias remains tilted upward.