US Dollar Forecast: Gains on Strong GDP and Jobless Claims – GBP/USD and EUR/USD

Market Overview

During Asian trading on Friday, the US Dollar Index (DXY) climbed toward 98.50, its highest in three weeks. The move followed stronger-than-expected US economic data, which suggested the Federal Reserve may avoid aggressive rate cuts in the near term.

Growth and Labor Market Support Dollar

The US economy expanded at an annualized rate of 3.8% in Q2, beating both the prior estimate and the 3.3% forecast. The data highlighted resilience in consumer spending and business investment, boosting dollar demand. Meanwhile, initial jobless claims fell to 218K in the week ending September 20, below both expectations of 235K and the revised 232K prior figure, signaling continued labor market strength.

Fed Officials Deliver Mixed Signals

Despite the upbeat data, Fed commentary remained divided. Kansas City Fed President Jeffrey Schmid argued for cuts to protect employment, while Chicago Fed President Austan Goolsbee warned against easing too soon given inflation trends.

Markets are now pricing in roughly 43 basis points of cuts across the final two Fed meetings this year, though policymakers stress decisions will depend on upcoming data.

PCE Data to Guide Market Outlook

Attention now turns to August’s Personal Consumption Expenditures (PCE) report. Consensus sees headline PCE at 2.7% YoY and core at 2.9%. A weaker print could revive rate-cut bets, while stronger figures may support further dollar gains.

US Dollar Index (DXY) – Technical Analysis

The U.S. Dollar Index (DXY) is holding near 98.38 after a sharp rally that tested resistance at 98.61. Price action is trading inside a rising channel, with the 50-EMA at 97.68 and the 200-EMA at 97.80 acting as strong support zones. The RSI is near 70, signaling overbought conditions, which could lead to short-term pullbacks.

A dip toward 98.08 would still keep the trend intact, provided the channel support holds. If buyers reclaim momentum above 98.61, the next targets sit at 99.14 and 99.52.

Conversely, a close below 97.80 would weaken the structure and expose 97.57. Momentum favors bulls, but near-term consolidation looks likely before another decisive move.

GBP/USD Technical Analysis

The GBP/USD ($GBPUSD) is trading near $1.3348, pressured within a descending channel that highlights bearish control. The pair sits below both the 50-EMA at $1.3482 and the 200-EMA at $1.3498, reinforcing downside momentum.

Immediate support lies at $1.3290, with further weakness exposing $1.3260 and potentially $1.3139. RSI is at 30, hovering just above oversold territory, signaling that selling pressure may be stretched, though buyers have yet to show strength. For recovery, the pair needs to reclaim $1.3427 and break above the channel top to shift sentiment.

EUR/USD Technical Forecast

The EUR/USD ($EURUSD) is trading near $1.1678 after breaking below its ascending channel, signaling weakening momentum. The pair slipped under the 50-EMA at $1.1749 and is now testing support just above $1.1630.

A sustained break lower could expose $1.1572 and $1.1515. The 200-EMA at $1.1710, which once acted as support, is now turning into resistance. RSI is at 31, hovering near oversold conditions, suggesting selling pressure may be slowing but not fully exhausted.

For bulls, a recovery above $1.1726 would be needed to regain footing. Until then, the trend leans bearish, with traders watching whether $1.1630 holds as a base or if further downside opens toward $1.15.