US Dollar Forecast: Fed’s Dovish Guidance Keeps Pressure on Dollar, GBP/USD and EUR/USD

Market Overview

The US Dollar Index (DXY) fell toward 96.20 in early trading, after the Federal Reserve announced a 25-basis-point rate cut. The move marked the Fed’s first policy easing since December, drawing investor focus to whether additional cuts will follow by year-end.

Fed’s Projections Pressure the Dollar

According to the Fed’s Summary of Economic Projections, most policymakers see rates ending the year between 3.5% and 3.75%. Markets read this as opening the door to as many as two more cuts in 2025.

The outlook reinforced expectations for easier monetary conditions, weighing heavily on the dollar.

Powell Balances Rate-Cut Outlook With Caution

Fed Chair Jerome Powell tempered market enthusiasm by stressing that policy decisions remain data-dependent. He noted that cuts will not follow a fixed schedule and that the central bank may pause if inflation or labor market conditions require.

His caution provided temporary stability, limiting deeper losses in the greenback.

Outlook Hinges on Data and Market Expectations

The dollar now trades in a delicate balance between easing expectations and the Fed’s cautious stance. Upcoming economic releases, particularly labor and inflation data, will be pivotal in shaping near-term direction.

For now, softer policy projections keep the dollar under pressure, while Powell’s measured tone prevents a sharper decline.

US Dollar Index (DXY) – Technical Analysis

The U.S. Dollar Index (DXY) is trading near 96.92, slipping after rejection from 97.25 resistance. The index remains below its 50-EMA (97.33) and 200-EMA (97.85), reinforcing bearish momentum.

The RSI sits at 42, showing weak recovery attempts but still in lower ranges. A break below 96.55 could extend declines toward 96.21 and 95.86. For bulls, reclaiming 97.25 and closing above the descending trendline would be needed to shift sentiment back toward 97.70.

Until then, the bias stays tilted to the downside, with sellers in control unless key levels are retaken.

GBP/USD – Technical Analysis

GBP/USD is trading near 1.3632 after pulling back from highs around 1.3677, testing the lower boundary of its rising channel. Immediate support sits near 1.3580, backed by the 50-EMA at 1.3579. Holding above this zone could allow bulls to reattempt 1.3677, with further targets at 1.3713 and 1.3749.

The RSI, now at 56, shows cooling momentum but still leans positive. A break below 1.3580 would shift attention toward 1.3533 and potentially 1.3492.

The broader structure remains bullish while above 1.3580, but short-term movement depends on whether buyers can defend this critical support zone.

EUR/USD – Technical Forecast

EUR/USD is trading near 1.1828 after testing resistance close to 1.1876 before pulling back. The pair remains inside an ascending channel, with support around 1.1800 and the 50-EMA near 1.1765 offering additional backing.

The RSI has cooled from overbought levels, now at 58, suggesting momentum is easing but still supportive. A bounce from the lower boundary of the channel could keep the uptrend intact, with buyers eyeing 1.1876 and 1.1912 as next upside levels.

On the downside, failure to hold 1.1800 may trigger a retest of 1.1740. Overall, the pair maintains a bullish structure, but short-term direction hinges on whether support at 1.1800 holds.