US Dollar Forecast: Struggles to Rebound Ahead of PMI and Trade Talks – GBP/USD and EUR/USD

Market Overview

The US Dollar Index (DXY) fell to 97.15 during Thursday’s Asian session, its lowest since July 7, as improving global risk sentiment and political instability in Japan weighed on safe-haven demand.

Optimism surrounding new trade deals boosted risk-on appetite, but uncertainty over Japan’s leadership tempered investor confidence, limiting any meaningful USD rebound.

Fed Independence in Focus as Powell Faces Pressure

Concerns over the Federal Reserve’s independence intensified after President Trump renewed public criticism of Chair Jerome Powell, raising doubts over future policy decisions.

Although no rate cut is expected at the upcoming FOMC meeting, the prospect of politically driven monetary policy is unsettling investors.

Treasury Secretary Scott Bessent hinted that a new Fed Chair nomination could emerge by early 2026, fueling leadership uncertainty.

Trade Talks and Key Data to Drive Short-Term Direction

Bessent also revealed plans to meet Chinese officials in Stockholm to discuss the August 1 trade deal deadline. Any breakdown in negotiations could trigger further dollar weakness.

Markets now turn to July’s flash PMI readings, with forecasts at 52.5 for manufacturing and 53.0 for services.

Alongside PMI, jobless claims, new home sales, and the Chicago Fed index may offer fresh direction. Until then, the dollar remains vulnerable to policy ambiguity and global risks.

US Dollar Index (DXY) – Technical Analysis

The U.S. Dollar Index (DXY) continues its downward trajectory within a well-defined descending channel on the 2-hour chart. After failing to reclaim the 98.00 resistance zone, the index dropped sharply and is now testing the key horizontal support near 97.11.

A sustained break below this level could open the door toward 96.74 and possibly 96.37 as the next bearish targets.

Both the 50-EMA and 100-EMA sit above the current price action, reinforcing bearish pressure. Should 97.11 hold, a rebound toward the upper channel boundary near 97.55 could be expected—but the broader structure favors further weakness unless the DXY closes decisively above 97.94.

GBP/USD Technical Analysis

The British pound continues to trade within a well-defined ascending channel, underpinned by rising momentum and support from the 50- and 100-period EMAs. After breaking above 1.3536, the pair surged to test the 1.3588–1.3600 zone but is now seeing mild pullback.

If the pair holds above 1.3536, buyers may target 1.3629 next, followed by 1.3676. A sustained break below the channel and EMAs would shift the bias toward 1.3497 and potentially 1.3451.

EUR/USD Technical Forecast

EUR/USD continues to trade firmly within a rising channel, supported by the 50-EMA and 100-EMA crossover. The pair broke through key resistance at 1.17216, which has now turned into support, and is currently consolidating just below 1.17825.

If momentum holds, the next upside target lies at 1.18085. A breakout above this level could expose 1.18303 and potentially 1.18400. On the downside, a break below 1.17550 may test 1.17216, with further losses eyeing 1.16849.

The short-term bias remains bullish as long as EUR/USD remains above the midline of the ascending channel and maintains support at the EMAs.