US Dollar Forecast: Range-Bound as Traders Await Powell’s Speech, GBP/USD and EUR/USD

Market Overview

During Asian trading on Tuesday, the U.S. Dollar Index (DXY) traded near 97.40, showing limited movement as traders awaited remarks from Federal Reserve officials for guidance on interest rates.

Support from Reduced Rate Cut Expectations

The index found modest support after investors trimmed expectations of an October rate cut. According to the CME FedWatch Tool, the probability of the Fed holding rates rose to 10.2% from 8.1% on Friday.

The shift followed comments from Fed officials highlighting ongoing inflation risks and signaling caution toward additional easing.

The Fed’s “dot plot” still implies two further quarter-point cuts this year, though Chair Jerome Powell stressed that policy remains data-dependent.

Divergent Fed Views Add to Market Uncertainty

Remarks from policymakers underscored internal debate. St. Louis Fed President Alberto Musalem described last week’s cut as a precaution to protect the labor market but warned of “limited room” for more reductions.

By contrast, Governor Stephen Miran, who dissented, argued for a steeper 50 bps move to address economic risks. These differences highlight policy uncertainty that keeps markets cautious.

Focus Shifts to U.S. PMI Data

Investors now await preliminary September S&P Global PMI figures. Softer readings could weigh on the dollar by raising growth concerns, while stronger data may reinforce expectations that the Fed will proceed cautiously with rate cuts.

US Dollar Index (DXY) – Technical Analysis

The Dollar Index (DXY) trades at 97.39, holding steady after finding support near 97.29. The index faces resistance from both the 50-EMA (97.40) and the 200-EMA (97.78), keeping momentum capped. A descending trendline adds further pressure, with RSI at 50 reflecting neutral tone. Immediate support lies at 96.91, followed by 96.55 if selling resumes.

On the upside, a break above 97.78 would target 98.08 and 98.44. Dollar sentiment remains sensitive to Fed policy signals and global risk appetite, with traders awaiting Powell’s remarks for fresh catalysts.

GBP/USD Technical Analysis

Sterling (GBP/USD) trades at 1.3519, stabilizing after slipping from recent highs near 1.3727. The pair has broken below its ascending channel, with both the 50-EMA (1.3534) and 200-EMA (1.3510) acting as immediate barriers.

RSI sits near 46, reflecting neutral momentum after last week’s sharp sell-off. Key resistance stands at 1.3560, while support rests at 1.3450.

A close below 1.3450 could expose 1.3395 and 1.3332. On the upside, regaining 1.3560 would ease pressure, allowing a retest of 1.3589.

EUR/USD Technical Forecast

The EUR/USD is holding around 1.1786, consolidating after bouncing from 1.1726 support. The pair remains above its broader ascending channel, though momentum has softened.

The 50-EMA (1.1770) and 200-EMA (1.1705) provide underlying support, while resistance is layered at 1.1820 and 1.1874.

RSI near 52 suggests balanced conditions with no clear bias. A daily close above 1.1820 would open the way to 1.1875, while slipping below 1.1768 risks another decline toward 1.1726.