US Dollar Forecast: Triangle Break Possible Before Fed – GBP/USD and EUR/USD

Market Overview

The U.S. Dollar Index (DXY) climbed to 98.10 in early trading Monday, supported by investor caution ahead of two key events this week: May’s U.S. retail sales data due Tuesday, and the Federal Reserve’s policy decision on Wednesday.

Geopolitical Risk Supports Dollar Strength

DXY gains were bolstered by renewed geopolitical tensions following remarks from former President Donald Trump urging the immediate evacuation of Tehran.

His comments, alongside Israel’s continued military posture and renewed warnings over Iran’s nuclear ambitions, triggered a shift toward safe-haven assets.

“IRAN CANNOT HAVE A NUCLEAR WEAPON,” Trump posted, escalating concerns about regional stability. As a result, the dollar is drawing support from risk-averse sentiment.

Markets Focused on Fed and Economic Outlook

Retail data could influence expectations around the Fed’s policy path. While rates are expected to remain on hold this week, traders will parse the “dot plot” and updated economic forecasts for signs of future easing.

With growing bets on a rate cut by September, DXY strength may hinge on whether the Fed acknowledges shifting economic conditions.

US Dollar Index (DXY) – Technical Analysis

The U.S. Dollar Index (DXY) is trading near 98.21, marginally higher by 0.06% on the day, as it consolidates within a symmetrical triangle pattern on the 2-hour chart. Price action remains tightly bound between lower highs and higher lows, with momentum stalling ahead of this week’s Federal Reserve policy statement.

The index has failed to break above the 50-period EMA at 98.28, which continues to act as dynamic resistance. The 200-period EMA looms higher at 98.91, reinforcing a broader bearish structure. Price has been compressing since June 11, with the lower bound of the triangle anchored around 97.87.

A decisive close above the triangle and the 50-EMA would tilt the short-term bias to the upside, targeting 98.58 and 98.90. On the other hand, a breakdown below 97.87 would invalidate the pattern and expose 97.60 and 97.30 as the next targets.

GBP/USD Technical Analysis

GBP/USD is hovering near 1.3558 after failing to hold above trendline support drawn from the June 10 low. The pair also sits just below the 50-period EMA at 1.3562, indicating early bearish pressure.

If the pair closes decisively below 1.3553, it could expose the 1.3533 and 1.3502 support zones. Meanwhile, a rebound above 1.3596 is needed to revive upside momentum.

Until then, the pair remains vulnerable to broader U.S. dollar dynamics, especially ahead of the Federal Reserve’s policy statement.

EUR/USD Technical Forecast

EUR/USD is trading near 1.1550 after failing to sustain above 1.1571 resistance. The pair has broken below its short-term ascending trendline, suggesting weakening bullish momentum. Price is now testing the 50-period EMA at 1.1532, a level that previously acted as dynamic support.

A decisive break below this could expose 1.1489, followed by 1.1452. On the upside, bulls need a recovery above 1.1571 to reattempt the recent high at 1.1615. With the Federal Reserve’s policy guidance expected soon, traders may stay cautious. Any hawkish surprise from the Fed could strengthen the dollar and weigh further on EUR/USD.