US Dollar Forecast: DXY Recovers After Weak Jobs Data and Fed Cut Bets – GBP/USD and EUR/USD

Market Overview

During the Asian session, the US Dollar Index (DXY) edged higher to 99.85, recovering modestly after recent losses. However, sentiment around the greenback remains fragile as traders react to disappointing US job data, growing expectations of a Federal Reserve rate cut in December, and the prolonged US government shutdown, which continues to cloud economic confidence.

Weak Job Market and Political Stalemate Pressure the Dollar

Fresh data showed that US companies cut 153,000 jobs in October, the largest decline for that month in over two decades. The poor labor data has strengthened expectations of an upcoming Fed rate cut, while the government shutdown, now the longest in US history, continues to erode investor confidence and weigh on the dollar’s outlook.

Fed Officials Signal Mixed Inflation Outlook

St. Louis Fed President Alberto Musalem said inflation remains under modest upward pressure due to tariffs, though he expects this effect to fade next year. Despite pockets of economic resilience, a softening labor market and political gridlock are reinforcing expectations of a more cautious Fed stance.

Trade Relief Offers Little Support

Washington’s plan to pause some tariffs on China’s shipbuilding industry has slightly eased trade tensions. Yet, with slowing job growth and fiscal uncertainty persisting, the dollar’s recovery remains fragile in the near term.

US Dollar Index (DXY) – Technical Analysis

The British Pound (GBP/USD) is trading near 99.79, finding support along the ascending channel’s lower boundary and the 38.2% Fibonacci retracement at 99.67. The recent pullback from 100.35 shows short-term consolidation after a strong October rally.

The 20-EMA is holding above the 50-EMA, maintaining a mildly bullish structure, while the RSI near 45 indicates neutral momentum after easing from overbought levels. A sustained close above 99.94 could resume the uptrend toward 100.35–100.64, whereas a break below 99.46 may expose deeper retracement toward 99.25 or even 98.99.

GBP/USD Technical Analysis

The British Pound (GBP/USD) is trading around 1.3122, attempting to recover from last week’s multi-month low but remains under strong downward pressure. The pair is capped by a descending trendline and the 50-EMA near 1.3150, which continues to act as dynamic resistance.

The RSI, now hovering just above 45, signals waning bullish momentum after a brief rebound, while sellers are likely to reemerge near resistance. A failure to break above 1.3150–1.3180 could renew downside pressure toward 1.3040 and 1.2980, key support levels within the prevailing downtrend.

Only a decisive close above 1.3240 would challenge the bearish structure, suggesting that rallies remain opportunities for sellers in the short term.

EUR/USD Technical Forecast

The EUR/USD pair is trading near 1.1539, struggling to extend gains as it faces resistance around 1.1550–1.1580, aligned with the descending channel’s upper boundary. The broader trend remains bearish, with price action capped by the 200-EMA and repeated rejections at trendline resistance since September.

The RSI has stabilized near 50, showing neutral momentum, but recent rallies appear corrective within the broader downtrend. A rejection from current resistance could trigger a pullback toward 1.1470 and 1.1450, with deeper losses eyeing 1.1420.

Only a clear break above 1.1580 would challenge the bearish structure, opening a potential move toward 1.1620. Until then, rallies remain sell opportunities within a weakening euro outlook.

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