US Dollar Forecast: Falls After Hot CPI and Weak Jobs Data – GBP/USD and EUR/USD

Market Overview

On Thursday, U.S. inflation data sent mixed signals to markets. The headline CPI rose 0.4% month-on-month, beating expectations of 0.3% and marking a faster pace than July’s 0.2%. Year-on-year inflation held at 2.9%, in line with forecasts. Core CPI, excluding food and energy, came in at 0.3%, unchanged from prior readings.

Labor Market Shows Signs of Strain

Weekly unemployment claims climbed to 263K, well above the forecast of 235K and higher than the previous 236K, pointing to softening in labor conditions. The increase suggests that while inflation remains elevated, underlying job market resilience is fading.

Eurozone Holds Steady, Market Awaits ECB Outlook

In Europe, the European Central Bank left its main refinancing rate unchanged at 2.15%, matching expectations. Investors looked for signals during the ECB press conference, but no new policy shifts were introduced, keeping the euro steady.

Key Data Ahead

Markets now turn their focus to Friday. In the U.K., monthly GDP is expected at 0.0%, a sharp slowdown from July’s 0.4%. In the U.S., attention shifts to the University of Michigan Consumer Sentiment Index, projected at 58.2, alongside inflation expectations at 4.8%. These figures will provide fresh direction on consumer confidence and the Federal Reserve’s policy outlook.

US Dollar Index (DXY) – Technical Analysis

The U.S. Dollar Index (DXY) is trading near $97.50, slipping below its rising channel support. The 50-EMA at $97.75 and 200-EMA at $97.96 now act as overhead resistance, confirming bearish momentum. Price failed to hold the $97.62 zone, turning it into fresh resistance.

On the downside, immediate support lies at $97.33, followed by $97.10. A break lower could expose the index to $96.88. The RSI at 37 signals bearish momentum, though nearing oversold territory, which may slow further losses.

For now, sellers remain in control as long as the index trades below $97.75. A recovery above this level is needed to shift momentum back toward $98.09–$98.42.

GBP/USD Technical Analysis

GBP/USD is trading near $1.3579, holding gains after bouncing from support at $1.3490. The pair is guided higher by an ascending trendline, showing buyers remain active at dips. The 50-EMA at $1.3530 and the 200-EMA at $1.3494 are providing strong downside support, helping sustain momentum.

On the upside, resistance is seen near $1.3618 and then $1.3646, where sellers capped recent advances. The RSI at 64 indicates steady bullish strength but is approaching higher levels where momentum could cool.

If price holds above $1.3553, a push toward $1.3618 looks possible. However, a break below $1.3530 could weaken momentum, opening the way back toward $1.3490 support.

EUR/USD Technical Forecast

EUR/USD is trading near $1.1740, extending gains after bouncing from support at $1.1704. The pair is supported by an ascending trendline that has guided price higher since early September. The 50-EMA at $1.1712 and the 200-EMA at $1.1684 are providing a strong floor, reinforcing bullish structure.

On the upside, immediate resistance is seen at $1.1779, followed by $1.1806. A clear break above these levels could open the path toward $1.1831. The RSI at 61 shows building momentum, though not yet stretched, suggesting room for further gains.

If price fails to hold above $1.1704, downside risk could extend toward $1.1661. For now, buyers remain in control as long as support levels hold.