US Dollar Forecast: Weakens Despite Strong US PPI Data and Jobless Claims – GBP/USD and EUR/USD

Market Overview

The US Dollar Index (DXY) hovered near 97.96 in Friday’s Asian session, extending its softer bias as markets anticipate a September Federal Reserve rate cut. The dovish outlook overshadowed stronger-than-expected US macro data, keeping gains in check.

Robust US Data Fails to Lift Dollar

US July Producer Price Index (PPI) climbed 3.3% year-on-year, beating both June’s 2.4% and forecasts of 2.5%. Core PPI rose to 3.7% from 2.6%, well above the 2.9% consensus. Weekly Initial Jobless Claims eased to 224K, better than expectations of 228K. The upbeat figures briefly supported the dollar but failed to reverse broader weakness.

Rate Cut Bets Limit Rebound

CME FedWatch Tool shows a 92% probability of a 25-basis-point Fed cut in September, up from 85% a week earlier. This firm conviction that the Fed will prioritize growth over inflation continues to cap the DXY’s upside.

Focus Turns to Retail Sales and Sentiment

Markets await July Retail Sales, forecast to rise 0.5% month-on-month. A stronger reading may help stabilize the dollar, while weaker data could reinforce rate cut bets.

The preliminary University of Michigan Consumer Sentiment index will also be closely monitored for further clues on economic momentum.

US Dollar Index (DXY) – Technical Analysis

The U.S. Dollar Index (DXY) is trading near 97.96 after facing rejection around the 98.31 resistance zone, aligned with the 50-EMA at 98.09. Price action remains capped by a descending trendline from late July, keeping the short-term bias bearish.

A sustained drop below 97.62 could expose the next supports at 97.37 and 97.12. On the upside, reclaiming 98.31 would open a path toward 98.63 and the 100-EMA at 98.23. The RSI has turned lower from the mid-50s, suggesting fading bullish momentum.

GBP/USD Technical Analysis

GBP/USD is trading near $1.3550, holding within an ascending channel on the 2-hour chart. The pair remains above the 50-EMA at $1.3513 and the 100-EMA at $1.3466, signaling bullish momentum despite recent consolidation. RSI at 54 suggests neutral-to-slightly bullish sentiment.

A sustained move above $1.3592 could target $1.3652 and $1.3711, while a drop below $1.3518 risks a decline toward $1.3455 and $1.3398.

EUR/USD Technical Forecast

EUR/USD is trading at $1.1676, holding above its ascending trendline from early August. The 50-EMA ($1.1663) and 100-EMA ($1.1645) are acting as dynamic supports, with key horizontal support at $1.1632. A bounce from this zone could target $1.1700 and $1.1731, while a break higher may open $1.1785.

On the downside, a drop below $1.1632 risks $1.1588 and $1.1531. RSI near 53 shows neutral momentum, leaving room for moves in either direction. The short-term bias remains cautiously bullish while the trendline holds.