US Dollar Forecast: Government Shutdown Caps Greenback Rebound – GBP/USD and EUR/USD

Market Overview

During the Asian session on Monday, the U.S. Dollar Index (DXY) traded slightly higher near $98.05, supported by cautious sentiment but capped by growing expectations of further rate cuts and uncertainty surrounding the U.S. government shutdown.

Government Shutdown Keeps Dollar in Check

The greenback gained mild support but remained under pressure as the U.S. government entered its fifth day of partial closure. Lawmakers failed to pass a spending bill to reopen operations, and President Donald Trump’s announcement of potential federal layoffs weighed on market confidence.

The delayed release of the September employment report has further clouded economic visibility, keeping investors cautious.

Fed Rate Cut Expectations Pressure the Greenback

Market bets on policy easing have limited upside for the dollar. CME FedWatch Tool data show a 95% probability of a 25-basis-point cut in October and an 83% chance of another in December.

Fed Governor Stephen Miran favored a more aggressive approach, while Dallas Fed President Lorie Logan warned that persistent inflation in non-housing services warrants restraint. This policy divergence has curbed the dollar’s directional momentum.

FOMC Minutes Could Shape Near-Term Outlook

Traders now await Wednesday’s FOMC minutes for clues on policy direction. A cautious tone may lend short-term support to the dollar, while confirmation of dovish sentiment could renew selling pressure.

US Dollar Index (DXY) – Technical Analysis

The Dollar Index (DXY) is trading near 98.16, showing mild strength after bouncing from the 97.45 support area. The price is testing resistance from a descending trendline while staying slightly above both the 50-day and 200-day EMAs near 97.81, indicating a neutral-to-bullish bias.

A clear breakout above 98.56 could open room for further gains toward 99.05 and 99.52. However, if the index fails to hold above 97.80, a pullback toward 97.45 or 96.89 may follow.

The RSI at 63 suggests growing bullish momentum, but traders will look for confirmation through volume and a sustained close above the trendline. Overall, the dollar is stabilizing with cautious upward potential.

GBP/USD Technical Analysis

The GBP/USD pair is trading around $1.3459, moving within a symmetrical triangle pattern as price compression continues. The 50-day EMA at $1.3460 and the 200-day EMA at $1.3483 are nearly aligned, showing a neutral bias and lack of strong directional momentum.

A breakout above $1.3470 could open the way toward $1.3537 and $1.3591, while a drop below $1.3386 might expose $1.3327. The RSI near 51 suggests balanced momentum, signaling neither buyers nor sellers are dominant.

Traders are waiting for a clear break from this consolidation zone to determine the next trend. Holding above $1.3380 maintains a constructive short-term outlook, but failure to do so could invite renewed selling pressure.

EUR/USD Technical Forecast

The EUR/USD pair is trading near $1.1707, hovering around its 50-day EMA at $1.1734 and 200-day EMA at $1.1716, reflecting market indecision. The pair has formed a symmetrical triangle pattern, suggesting consolidation before a potential breakout.

A close above $1.1742 could shift momentum toward $1.1810, while a drop below $1.1680 may open the way to $1.1615. The RSI at 42 indicates fading bullish strength and possible short-term pressure.

The pair remains range-bound as traders await fresh cues from U.S. and Eurozone data. Maintaining support above $1.1660 keeps the structure stable, but sustained selling below that level could confirm a bearish extension toward the $1.1570 zone.