US Dollar Forecast: Falls as Fed Signals July Cut, Tariff Risks Persist – GBP/USD and EUR/USD

Market Overview

The US Dollar Index (DXY) slipped in early European trade, hovering around 98.25 as concerns mounted over the economic impact of new tariffs and dovish Federal Reserve commentary. Despite resilient economic data, the greenback remains under pressure.

Tariff Risk Undermines Dollar Ahead of August 1 Deadline

The latest dip in DXY reflects market unease over trade tensions. Reports suggest President Trump may impose 15%–20% tariffs on EU goods, with August 1 set as a firm deadline.

While Commerce Secretary Howard Lutnick voiced optimism over reaching a deal, his remarks failed to reassure markets. Investors remain cautious amid mixed messaging from Washington, as the threat of retaliatory measures looms.

Fed’s Dovish Tone Fuels Rate Cut Expectations

Federal Reserve Governor Christopher Waller has added to the Dollar’s weakness, calling for a preemptive rate cut in July due to early signs of labor market stress.

While futures markets still assign a 94% chance of a hold, dovish rhetoric is eroding confidence in the Dollar’s upside.

Solid US Data Provides Temporary Cushion

Friday’s data offered some support: consumer sentiment rose to 61.8 in July, and housing starts jumped 4.6% to 1.32 million units. However, these positive figures have not been enough to offset rising policy and geopolitical uncertainty.

US Dollar Index (DXY) – Technical Analysis

The Dollar Index (DXY) is trading around 98.25, teetering near the 100-EMA support at 98.15. Price action has formed a series of lower highs since last week’s peak near 98.91, hinting at a descending trendline resistance pressuring bulls. Despite a short-lived bounce toward 98.62, the greenback failed to reclaim the 50-EMA at 98.36, signaling weakness.

This muted dollar performance has provided breathing room for gold and silver, which often move inversely to the greenback.

If DXY closes below 98.15, it may open the door toward 97.83 and 97.55, further supporting upside in metals. Traders will watch for any rebound off this key technical zone.

GBP/USD Technical Analysis

The British pound (GBP/USD) is holding around 1.3450 against the U.S. dollar, showing resilience after bouncing from ascending trendline support near 1.3401. However, the pair now faces a critical test at 1.3465, which aligns with a descending trendline and the 100-period EMA, both acting as key resistance levels.

The 50-EMA at 1.3432 offers immediate support, with a break below potentially exposing 1.3400 and 1.3375. A clean break above the 1.3465–1.3492 zone could trigger bullish momentum toward 1.3517.

EUR/USD Technical Forecast

The EUR/USD is trading around 1.1642 against the U.S. dollar, showing signs of renewed bullish momentum after rebounding from support near 1.1613. Price action is once again approaching a descending trendline that has capped upside since late June.

Notably, the pair is hovering just below both the 50-EMA (1.1653) and 100-EMA (1.1655), suggesting a confluence of resistance levels that could dictate the next breakout. A decisive close above 1.1655 would likely signal a short-term trend reversal, exposing 1.1692 and 1.1720 as upside targets.

On the downside, failure to clear the EMA cluster may lead to a pullback toward 1.1583 and 1.1543. Traders remain cautious ahead of this week’s PMI data, which could provide clarity on the eurozone growth outlook.