US Dollar Forecast: Trump-Japan Pact Lifts DXY – GBP/USD and EUR/USD Outlook

Market Overview

During Wednesday’s Asian session, the US Dollar Index (DXY) stabilized around 97.50, pausing a three-day slide. The greenback gained modest support as investors assessed political comments from Donald Trump and awaited Thursday’s S&P Global PMI data, which may influence expectations for Fed policy.

Trump-Japan Trade Pact Offers Dollar Support

The dollar found a floor after Trump announced a new trade agreement with Japan. The deal includes a 15% tariff on Japanese goods and a $550 billion investment commitment from Tokyo into the US economy. It also improves access for American exports, helping bolster trade prospects.

The announcement temporarily lifted the dollar, reflecting renewed investor confidence in cross-border investment and trade momentum.

Fed Pressure Intensifies Amid Trump’s Powell Criticism

Trump also reignited debate over Federal Reserve independence, stating, “Powell’s going to be out soon anyway; he’s got to be out in eight months,” while calling for rates to be cut to 1%.

His remarks added political overtones to ongoing discussions about the Fed’s path, particularly ahead of key US economic data.

Philippines Trade Optimism Adds to Dollar Resilience

Trump’s meeting with the Philippines President Marcos further supported sentiment. He expressed confidence in a forthcoming trade deal and acknowledged Manila’s balancing act with China, signaling a pragmatic US trade stance in Asia. Traders now await Thursday’s PMI data for stronger policy signals.

US Dollar Index (DXY) – Technical Analysis

The U.S. Dollar Index (DXY) is trading at $97.41, hovering just below key resistance at $97.56. The index remains under pressure, having slipped from its recent peak above $98.80.

Both the 50- and 100-period EMAs, at $97.92 and $97.97 respectively, are positioned above current price levels, signaling a bearish short-term bias.

A break below $97.18 could accelerate the downside toward $96.89 and $96.61. On the upside, only a decisive move above $97.99 would signal a shift in trend.

GBP/USD Technical Analysis

The British pound continues its upward trend, with GBP/USD trading at 1.3542 after clearing the 1.3515 resistance level. The pair is supported by a rising channel and trading above both the 50- and 100-period EMAs, positioned at 1.3477 and 1.3481, indicating a bullish bias. A sustained break above 1.3583 could open the door to the next resistance at 1.3621.

On the downside, a pullback below 1.3515 would expose the 1.3470 level, where moving averages may provide support. Traders are watching for a confirmation above 1.3583 to validate further gains toward 1.3657.

EUR/USD Technical Forecast

The EUR/USD pair is trading at $1.1738, holding within a steady upward channel. The 50-period EMA at $1.1685 and the 100-period EMA at $1.1675 remain below the price, reinforcing the short-term bullish structure. However, upside momentum is now facing resistance near the $1.1757 level, which marks an immediate barrier.

A close above this point may expose the $1.1782 and $1.1809 areas. Conversely, initial support sits at $1.1717, followed by $1.1678. If these levels fail to hold, short-term pressure could build.