US Dollar Price Forecast: Dollar Claws Back to 99.00 – Is a GBP/USD and EUR/USD Crash Next?

Market Overview

The US Dollar Index is hovering just above 98.90–99.05, now about 0.3% higher as the market decides once again to favour defensive positions. This is partly due to a collapse in US-Iran talks and a US naval blockade announcement – that’s sent oil prices rocketing and inflation worries rising again.

All of which is forcing investors to reconsider whether the Federal Reserve is likely to cut interest rates sharply – previously they’d been bracing for some serious rate cuts. The dollar is benefiting from the safe-haven effect plus its role as a global cash cow, and has clawed its way back up from recent lows of around 98.50.

EUR/USD and GBP/USD Take a Hit as Dollar Strengthened

EUR/USD is now slipping towards 1.1680-1.1710, down roughly 0.3-0.5% as higher oil prices are casting a shadow over the eurozone’s energy outlook and forcing investors to worry about inflation. The pair had just put in some impressive numbers recently but is now getting pinched by the strong dollar and shifting inflation expectations.

GBP/USD has also weakened to sit near 1.3400-1.3420 and is retreating from last weeks highs. Despite still having some long term momentum though – sterling is vulnerable to all the energy driven inflation risks and a general risk-off mood that’s gripping the market.

The Big Picture – Inflation and Politics Take Centre Stage

Now the markets are looking to see how US inflation data pans out and what further developments there are in the Middle East. Elevated oil prices and ongoing uncertainty there is likely to keep currency markets on the move in the short term.

US Dollar Index (DXY) – Rebounds as Oil Shock Re-ignites Safe-Haven Crowd

Dollar Index (DXY) is stuck hovering around $98.97, barely clinging to an ascending trendline support just above $98.50. You can see price action’s been doing this lower high thing since early April – a pretty clear sign the bullish vibes are starting to fade. The 50-day EMA has given up the ghost and is now acting as resistance just above $99.20, with the 200-EMA still lingering up above $99.50. That bearish bias is looking pretty strong right now.

We’re seeing a lot of rejection around $99.20-$99.50 on the recent candlesticks, which tells us the sellers are still very much on the job. RSI is labouring back up from the oversold zone around 30 towards 45, which might just squeeze out a short-term bounce – but don’t get your hopes up, no reversal just yet. On the other hand, if the price does break below $98.50 we could see some serious downside momentum towards $98.00.

Trade idea: Looking at a sell below $98.50, expecting to hit $98.00, but be ready to cover if price gets above $99.20.

GBP/USD Technical Analysis: Holds Fibonacci Support as Uptrend Faces Resistance

GBP/USD is trading near $1.3426, still managing to cling on to that major Fibonacci level at $1.3380 – which is now our immediate support. The price is still respecting that ascending trendline, which is quite a long sequence of higher lows we’ve got going on since early April. But despite that, the pair is still getting held back by a bit of resistance up around $1.3450-$1.3480, where multiple wicks on the candles are showing us that selling is still putting up a fight.

The 50-day EMA is still ticking along upwards near $1.3390, which is a nice bit of short-term support – and the 200-EMA below $1.3320 is still reinforcing that broader recovery. RSI has cooled down a bit towards 55 after some pretty recent highs, so it’s telling us the momentum might be slowing a bit. A break above $1.3450 and we could be looking at continuation – but lose $1.3380 and we might just shift the bias.

Trade idea: Looking to buy above $1.3450, expecting to hit $1.3500, but be ready to cut losses if we get below $1.3380.

EUR/USD Technical Forecast: Holds Breakout Zone Above 1.1650 With Bullish Structure

EUR/USD is trading around $1.1685, still managing to stay strong above that key support zone near $1.1650. Just a few weeks ago that level was acting as resistance, but now it’s seen as a major support level. We’ve also got price chalking up new higher lows above an ascending trendline, which is pretty much the definition of a healthy bull market.

The 50-day EMA is still trending upwards and now provides a bit of support near $1.1660, while the 200-EMA is still lagging behind, which is telling us we’re still in a recovery phase here.

Now we just need to see the price break above $1.1720 and we could be looking at continuation all the way to $1.1760

Trade idea: If we do see the price pop above $1.1720, our target would be $1.1760 – and we’d be looking to stop losses below $1.1650.