US Dollar Forecast: Dollar Gains Capped by Fed Turmoil, Eyes GDP Print – GBP/USD and EUR/USD

Market Overview

During early Asian trading on Wednesday, the US Dollar Index (DXY), which tracks the currency against six major peers, traded near 98.50 after recovering from recent losses.

The rebound comes as markets await Q2 GDP and July’s Personal Consumption Expenditures (PCE) Price Index—closely watched by the Federal Reserve as its preferred inflation gauge.

Fed Leadership Concerns Limit Dollar Gains

The dollar’s upside remains constrained by uncertainty over the Fed’s leadership. On Tuesday, President Donald Trump announced plans to remove Fed Governor Lisa Cook, citing a dispute over mortgage documents.

He nominated White House economist Stephen Miran to a temporary seat expiring in January and signaled he may be considered for a longer-term role. Former World Bank president David Malpass is also viewed as a possible candidate.

This has heightened speculation about a more dovish Fed. According to the Personal Consumption Expenditures (PCE), traders now price in an 87% probability of at least a 25-basis-point cut in September, up from 84% the previous day.

Market Outlook Hinges on Economic Data

Investors are closely watching Q2 GDP and PCE data for direction. A stronger economy could limit easing, while weaker readings may reinforce expectations for rate cuts.

For now, the DXY’s trajectory is shaped by both incoming data and growing questions over central bank independence.

US Dollar Index (DXY) – Technical Analysis

The U.S. Dollar Index (DXY) is trading around 98.45, consolidating within a symmetrical triangle as price gets squeezed between higher lows and a descending resistance trendline. The 50-EMA (98.23) and 100-EMA (98.24) are converging, showing a neutral short-term trend.

The RSI is at 57 points, indicating improving momentum, though not yet at overbought levels, while the MACD is slightly positive, signaling cautious bullish bias. Key resistance sits at 98.82; a breakout above could send DXY toward 99.32–99.71.

On the downside, support rests at 97.64, with deeper levels at 97.12 and 96.62 if sellers regain control. With volatility compressing, the next decisive candle around 98.80 could dictate whether the dollar extends higher or resumes its decline.

GBP/USD Technical Analysis

GBP/USD is trading near 1.3456, hovering just below the 50-EMA at 1.3473 and 100-EMA at 1.3464, both acting as immediate resistance. The pair recently broke out of an ascending channel, shifting momentum toward the downside. The RSI at 45 suggests weakening momentum, while the MACD remains flat near zero, signaling indecision but with a slight bearish tilt.

Key support sits at 1.3410, and a break lower could expose 1.3330 and 1.3230. On the upside, bulls need to reclaim 1.3544 to regain momentum toward 1.3593. For now, the technical setup leans bearish, with the risk of continued pressure unless buyers can force a close above the EMA cluster near 1.3470.

EUR/USD Technical Forecast

EUR/USD is trading near 1.1613, holding just above trendline support that has guided the pair since July. Price action is caught in a consolidation zone between 1.1581 support and 1.1656 resistance, with the 50-EMA at 1.1649 and 100-EMA at 1.1645 pressing overhead.

The RSI at 42 shows fading momentum, keeping bears slightly in control, while the MACD remains flat near zero, signaling indecision. A breakdown below 1.1581 could expose 1.1518 and 1.1459.

Conversely, a move above 1.1656 would shift focus toward 1.1723–1.1781. For now, the pair is coiling at a critical juncture, with the next breakout likely to define whether EUR/USD extends its correction lower or attempts a recovery.