US Dollar Forecast: Rises as 35% Canada Tariff and Strong Jobs Data Lift DXY – GBP/USD and EUR/USD

Market Overview

During Friday’s Asian session, the U.S. Dollar Index (DXY) climbed toward 97.80 following President Donald Trump’s announcement of new tariffs targeting major trading partners.

The dollar’s strength reflects increased safe-haven demand and revised expectations that the Federal Reserve may delay rate cuts due to rising inflation risks linked to the tariffs.

U.S. Tariff Expansion Sparks Inflation Concerns

The upward move in DXY was driven by Trump’s decision to impose a 35% tariff on all Canadian imports starting August 1. Over 20 formal notices were issued to global trade partners, warning them of further tariffs if no deals are reached.

The new measures extend to copper, pharmaceuticals, and semiconductors and include a 50% tariff on Brazilian goods. Markets are now factoring in the broader economic impact, including inflationary pressure and potential disruptions to global growth.

Fed Policy Expectations Shift Amid Labor Strength

Trade tensions are reshaping expectations for the Fed’s monetary policy path. While markets still anticipate 50 basis points in rate cuts by year-end, starting in October, expectations for more aggressive easing have diminished.

Adding to the Fed’s cautious stance, initial jobless claims declined to 227,000 last week, better than the forecast of 235,000.

The report reinforces a stable labor market, reducing the urgency for immediate policy action and lending further support to the dollar.

US Dollar Index (DXY) – Technical Analysis

The U.S. Dollar Index (DXY) remains within a rising channel on the 2-hour chart, respecting both trendline support and resistance. Price action is currently consolidating below 97.919, which aligns with horizontal resistance. The 50-period EMA at 97.508 is acting as near-term support, while the 200-period EMA at 97.635 is being tested from below.

Price has respected the channel midline as dynamic support during minor pullbacks. A break above 97.919 may open room toward 98.195, while a drop below 97.569 could expose 97.270.

GBP/USD Technical Analysis

GBP/USD is consolidating below the descending trendline, with price capped under both the 50-EMA at 1.3592 and the 200-EMA at 1.3604. The pair recently rejected the 1.3573–1.3560 horizontal resistance zone and is now hovering just above support at 1.3524.

The EMAs have turned downward, signaling continued bearish pressure. Failure to reclaim 1.3573 could trigger a deeper decline toward 1.3485, with 1.3446 as the next level below. A break above the descending trendline and a close above both EMAs would be needed to shift momentum.

Until then, the setup favors further downside within the current structure. The 1.3560–1.3573 area remains a critical pivot for short-term direction.

EUR/USD Technical Forecast

EUR/USD is trading near the lower boundary of a descending triangle, with price bouncing from support around 1.1671, which aligns with the 200-period EMA. The pair is currently capped below the 50-period EMA at 1.1716 and remains within a tight range. Horizontal resistance stands at 1.1705 and 1.1729, with triangle resistance descending from the recent highs.

Price action suggests indecision near the apex of the structure. A clear break above 1.1729 could shift momentum higher toward 1.1765. Conversely, failure to hold above 1.1671 may expose 1.1650 and 1.1625. EMAs are flattening, reflecting short-term consolidation.