US Dollar Forecast: Fed Cut Signals Stir Market Ahead of PCE – GBP/USD and EUR/USD

Market Overview

During Asian trading on Friday, the US Dollar Index (DXY) steadied near 98.00, rebounding after three days of declines. The move comes as investors await the release of the July Personal Consumption Expenditures (PCE) Price Index, the last major inflation report before the Federal Reserve’s September policy meeting.

Strong GDP Growth Supports Dollar

The Dollar gained support from upbeat economic data. On Thursday, the US GDP Annualized for Q2 was revised higher to 3.3%, topping both the prior 3.1% estimate and the earlier 3.0% reading.

The data underscored continued economic resilience despite global pressures, limiting downside risks for the currency.

Fed Signals Shape Market Expectations

Remarks from Fed Governor Christopher Waller added momentum, as he expressed support for a rate cut in September and potential further easing over the next six months to protect the labor market.

Markets are now pricing in a high probability of a 25-basis-point cut, with July PCE forecasts at 2.6% year-on-year for headline inflation and 2.9% for core.

Political Comments Stir Uncertainty

Concerns over the Fed’s independence weighed on sentiment after Vice President JD Vance suggested monetary policy should not be left solely to unelected officials.

His comments raised speculation about greater political influence over interest rate decisions, injecting added uncertainty into the Dollar’s outlook.

US Dollar Index (DXY) – Technical Analysis

The U.S. Dollar Index (DXY) is holding near 97.98, consolidating inside a symmetrical triangle on the 4-hour chart. The price is hovering below both the 50-EMA at 98.16 and the 200-EMA at 98.25, indicating a lack of clear momentum. The RSI is neutral, hovering around 44–47, which suggests indecision. Recent candlesticks display small bodies with wicks on both sides, indicating balanced buying and selling pressure.

Key support rests at 97.56, while resistance at 98.27 remains pivotal. A breakout above 98.27 could open the path toward 98.81 and 99.19, whereas a breakdown below 97.56 risks a deeper retracement toward 97.12. Traders should watch for the narrowing structure to determine the next decisive move.

GBP/USD Technical Analysis

The GBP/USD is trading around $1.3486, with price action holding just above its 200-EMA at $1.3465 and testing the 50-EMA at $1.3483 on the 4-hour chart. The pair remains supported by an ascending trendline from early August, signaling buyers are still defending higher lows.

The RSI at 49 suggests a neutral stance, with momentum balanced between bulls and bears. If GBP/USD breaks above $1.3530, it could pave the way toward $1.3593, while a failure to hold the $1.3465–$1.3427 zone risks a slide toward $1.3313.

EUR/USD Technical Forecast

The EUR/USD is trading near $1.1668, holding just above the 50-EMA at $1.1651 and the 200-EMA at $1.1634 on the 4-hour chart. Price action is supported by a rising trendline from early August, confirming higher lows. Momentum remains steady, with the RSI around 54, suggesting moderate bullish strength without overbought conditions.

A break above $1.1725 could extend gains toward $1.1781, while failure to hold above the EMAs risks a pullback to $1.1629 or even $1.1581. Candlesticks show small-bodied candles with wicks, reflecting market indecision.