US Dollar Forecast: Tariffs and Fed Easing Pressure Greenback, GBP/USD and EUR/USD

Market Overview

The U.S. Dollar Index (DXY) held weak around 97.73 on Tuesday, marking its third consecutive session of losses. The cautious tone reflects investor hesitation ahead of critical U.S. labor market releases, which are expected to shape both economic outlook and Federal Reserve policy.

Added to this, political uncertainty surrounding a potential government shutdown continues to weigh on sentiment.

Jobs Data at Risk Amid Shutdown Concerns

Markets are focused on September’s Nonfarm Payrolls, job openings, private payrolls, and the ISM manufacturing PMI. However, a possible shutdown could delay these reports, leaving traders without crucial guidance.

Political risks have intensified after warnings that federal job cuts could follow if lawmakers fail to approve a funding bill, keeping pressure on the dollar as investors await clarity.

Tariff Measures Add Economic Headwinds

Trade risks are also in focus. Reuters reported that former President Donald Trump signed a proclamation imposing tariffs of 10% on lumber imports and 25% on vanities, cabinets, and upholstered wooden products. Effective October 14, the measures raise concerns over inflationary pressures and potential supply chain disruptions.

Fed Rate Cut Bets Mount

Monetary policy expectations reinforce the dollar’s weakness. CME FedWatch shows nearly a 90% probability of a rate cut in October and 70% odds of another in December. Rising bets on Fed easing continue to pressure Treasury yields and cap the dollar’s recovery.

US Dollar Index (DXY) – Technical Analysis

The U.S. Dollar Index is trading at 97.73 after slipping below the 50-EMA (97.93) and the 200-EMA (97.74), turning both into immediate resistance. Price broke down from its rising channel, confirming weaker momentum.

The RSI is at 35, showing the index is close to oversold levels but not yet at extremes. Support sits at 97.20 and then 96.83, while a deeper move could test 96.23.

On the upside, a rebound above 97.90 would be needed to shift momentum back toward 98.20–98.56. For now, sellers hold control, and the focus remains on whether support levels can stabilize the index or if further downside develops.

GBP/USD Technical Analysis

The GBP/USD is trading around $1.3447, consolidating near the $1.3467 resistance zone. Price is testing a descending trendline, while the 50-EMA at $1.3432 acts as immediate support. The 200-EMA at $1.3486 remains a stronger resistance barrier.

A clear breakout above $1.3467 could open the way toward $1.3537, while failure here risks a pullback toward $1.3386 and $1.3328. The RSI at 58 shows improving momentum but not yet overextended, suggesting room for further upside if bulls maintain pressure.

EUR/USD Technical Forecast

The EUR/USD is trading near $1.1753 after breaking above its descending channel, signaling improving momentum. Price is now holding above the 200-EMA at $1.1736 and testing the 50-EMA at $1.1727, turning them into short-term support.

The RSI at 64 shows strengthening momentum, but not yet overbought. Key resistance sits at $1.1820 and $1.1871, while support lies at $1.1661 if buyers lose control.

A sustained close above $1.1770 would reinforce bullish momentum toward $1.1820, while failure to hold above $1.1730 could bring the pair back into consolidation. For now, the bias leans upward, with traders watching U.S. data for confirmation.