US Dollar Forecast: DXY Tests $97.80 on Fed Tone Shift – What’s Next for GBP/USD and EUR/USD?

Market Overview

The broad-based US Dollar extended its upward trend and remained bullish on the day. As of now, the US Dollar Index (DXY), which tracks the performance of the US Dollar (USD) against six major currencies, is trading around the 97.80 level.

However, the reason behind its upward rally could be linked to hawkish signals from the Federal Reserve and expectations that US interest rate cuts may proceed at a slower pace than previously anticipated.

Hawkish Fed Signals Support the Dollar

As we mentioned, the US dollar gained ground after Fed Governor Lisa Cook indicated that she would not support another rate cut without clear signs that inflation is easing. She also stated that the Fed is more concerned about inflation than about job creation. Her comments show that the Fed will be careful with cutting rates, which is helping the Dollar rise.

Moreover, the nomination of Kevin Warsh as Fed chair has also influenced market sentiment. Warsh prefers a smaller Fed balance sheet and slower rate cuts.

In contrast, US President Donald Trump stated that he would not have nominated Warsh if he supported aggressive rate hikes. Trump further said interest rates are high right now, but the Fed will lower them gradually because the US economy is strong.

Mixed US Economic Data Supports the Dollar

On the economic front, the latest ADP Employment Change showed private payrolls rose by just 22K in January, which was well below expectations of 48K and the revised 37K from the previous month. Although the print was weak, it gained extra attention as official government data releases were delayed.

In addition to this, the Institute for Supply Management (ISM) reported that the Services PMI remained steady at 53.8 in January, slightly above analysts’ expectations of 53.5.

Consequently, the mixed economic data suggest a slowdown in private hiring but steady service sector activity, which may influence future Fed decisions. Hence, the weak jobs growth and steady services data strengthened the US dollar, as investors expect the Fed to cut rates slowly.

US Dollar Index Forecast: DXY Stabilizes Near $97.7 as Trendline Pressure Persists

The US Dollar Index (DXY) is holding near $97.76 as it tries to recover from a recent drop from $99.8. On the 4-hour chart, the price is still below a downward trendline from January highs, so the overall outlook stays cautious.

Recent candlesticks are smaller and show less downward momentum, suggesting the DXY may consolidate in the short term instead of bouncing back strongly. The index is staying above the 61.8% Fibonacci retracement at $97.62, with support at $97.22 and a risk of falling further to $96.34.

The 50-EMA is steady near $97.7, and the 200-EMA at about $98.3 is still acting as resistance. The RSI has moved up toward 60, showing better momentum but not yet confirming a bullish breakout.

Trade idea: Consider buying if the price moves above $97.90, with a target of $98.90 and a stop loss below $97.20.

GBP/USD Forecast: Rising Trendline Tested as Price Slips Toward Key Fib Support

GBP/USD is trading close to $1.362 after dropping back from the $1.38 high. On the 4-hour chart, the pair has fallen below short-term support and is now testing the rising trendline from mid-January, which shows that upward momentum is fading.

Recent candlesticks show several bearish moves with small lower wicks, suggesting steady selling instead of a sudden drop. The price is holding just above the 61.8% Fibonacci retracement at $1.358, which has served as short-term support.

The 50-EMA near $1.368 is now acting as resistance, while the 200-EMA around $1.348 continues to mark the main trend. If the price moves back above $1.370, it could help steady the outlook. But if it falls below $1.358, there may be more downside toward $1.348.

Trade idea: Consider selling if the price drops below $1.358, with a target of $1.348 and a stop above $1.370.

EUR/USD Forecast: Bulls Pause Near $1.18 as Trend Support Gets Tested

EUR/USD is trading close to $1.179, slipping after it could not hold above $1.20. On the 4-hour chart, the pair has moved back toward a rising trendline that started in mid-January. This points to a steady pullback instead of a full reversal.

Recent candlesticks have smaller bodies and long wicks, showing indecision as buyers try to hold support. The price is near the 50-EMA at about $1.182, and the 200-EMA at $1.170 is still strong support below. The pair is staying above the 38.2% Fibonacci retracement at $1.178, which keeps the outlook positive.

Trade idea: Consider buying near $1.178, aiming for $1.198, with a stop below $1.168.