US Dollar Forecast: Sinks as Tariff Pressures Mount, Fed Outlook in Focus – GBP/USD and EUR/USD

Market Overview

The US Dollar Index (DXY) remains under pressure, trading near 98.33, its lowest level since March 2022. The persistent weakness reflects heightened market anxiety over escalating trade tensions and the uncertain direction of US monetary policy. With Washington intensifying tariffs on Chinese imports and Beijing issuing strong counter-warnings, investors are increasingly seeking clarity on both trade and economic strategy.

Political pressure on the Federal Reserve has further complicated the outlook. Fed Chair Jerome Powell has recently acknowledged the challenge of navigating slowing growth alongside persistent inflation, while speculation grows over potential leadership changes.

Events Ahead

Traders will be closely monitoring today’s busy U.S. calendar, including remarks from FOMC members Jefferson (1:00 pm), Harker (1:30 pm), Kashkari (5:40 pm), and Kugler (10:00 pm ET). These comments may shed light on whether the Fed intends to maintain its cautious stance or prepare for easing.

At 2:00 pm ET, the Richmond Manufacturing Index is forecast at -6, down from -4, reinforcing concerns over regional economic softness.

US Dollar Index (DXY) – Technical Analysis

The U.S. Dollar Index is trading around $98.33 on the 2-hour chart, with price action trapped in a narrow consolidation below key resistance. After a sharp breakdown last week, the dollar has struggled to regain momentum, and sellers continue to defend the pivot at $98.52. Immediate resistance rests at $98.52, followed by $99.17, while support is seen at $97.93 and $97.42.

The 50 EMA sits overhead at $99.08, with the 200 EMA much higher at $101.14, reinforcing the prevailing downtrend. A descending trendline from April highs adds further pressure on the upside.

Conclusion: Until DXY reclaims the 50 EMA, rallies may remain short-lived. A break below $97.93 would likely confirm further weakness.

GBP/USD Technical Analysis

Sterling (GBP/USD) is holding steady around $1.3392, consolidating gains after a sharp breakout above $1.3366, which now acts as immediate support. The pair remains well within its ascending channel, supported by the 50 EMA at $1.3304 and the 200 EMA further below at $1.3111.

Resistance is shaping up near $1.3448, with the next ceiling at $1.3498 if momentum holds. Support levels to watch are $1.3366 and $1.3302.

EUR/USD Technical Forecast

The EUR/USD is holding ground near $1.1505, consolidating after a strong breakout earlier this week. Price has been fluctuating between the pivot at $1.1488 and immediate resistance at $1.1563. A break above this could expose $1.1603, while support lies at $1.1437, followed by $1.1387.

The 50 EMA is currently rising at $1.1430, while the 200 EMA is way below at $1.1197, reinforcing the underlying bullish trend. The pair continues to ride an ascending trendline, but buyers appear cautious near upper resistance levels.