US Dollar Forecast: Fed Rate Cut Odds Surge to 94% on Jobless Claims Rise – GBP/USD and EUR/USD

Market Overview

The US Dollar Index (DXY) climbed to 98.12 during Friday’s Asian session, ending a two-day decline. The index tracks the USD against six major currencies and serves as a key measure of dollar strength.

Gains came amid expectations of Federal Reserve rate cuts, following weaker US labor data and differing views among policymakers on inflation and tariffs.

Fed Signals Remain Mixed

Fed Governor Christopher Waller, a potential future Chair, signaled support for a modest rate cut, viewing tariff-related inflation as temporary. However, most officials favored holding rates steady.

Atlanta Fed President Raphael Bostic maintained a cautious tone, anticipating only one cut this year while questioning whether tariff-driven price pressures will ease quickly.

Soft Labor Data Lifts Rate Cut Odds

US Labor Department figures showed Initial Jobless Claims rising to 226,000 for the week ending August 2, above expectations of 221,000. Job growth over the past three months slowed sharply, and consumer spending indicators weakened, pointing to cooling economic momentum.

According to CME FedWatch, the probability of a 25 basis point cut in September jumped to nearly 94% from 48% a week earlier. The prospect of a less restrictive Fed stance is weighing on the dollar in the near term, as traders position for easier monetary conditions.

US Dollar Index (DXY) – Technical Analysis

The U.S. Dollar Index (DXY) is trading at 98.12, holding below both the 50-EMA (98.57) and 100-EMA (98.47), signaling sustained downside pressure. Price action shows repeated failures to reclaim the 98.48 resistance, with short-term structure favoring a range-bound move before a potential drop toward trendline support near 97.83.

A decisive break below this level could open the path to 97.50 and 97.12. Upside attempts remain limited unless the index secures a sustained close above 98.48, which would shift focus back to 99.07.

GBP/USD Technical Analysis

GBP/USD is trading at 1.3448, holding above its 50-EMA (1.3350) and 100-EMA (1.3384), signaling sustained bullish momentum. The pair is testing resistance at 1.3449, with the next upside target at 1.3492, followed by a stronger barrier at 1.3544.

On the downside, immediate support is at 1.3417, aligned with the rising trendline from the August lows. A break below this could expose 1.3365 and then 1.3311.

Momentum remains in favor of buyers as long as the price stays above the 1.3365 zone, but failure to hold trendline support may invite a deeper retracement.

EUR/USD Technical Forecast

EUR/USD is trading at 1.1659, holding above the 50-EMA (1.1601) and 100-EMA (1.1612), suggesting short-term bullish momentum. The pair is pressing against descending trendline resistance near 1.1680, with a breakout potentially targeting 1.1718.

Failure to clear this level could trigger a pullback toward immediate support at 1.1639, followed by 1.1589. A sustained break above 1.1718 could open the way toward 1.1778, while a drop below 1.1589 would shift focus back to 1.1528.