US Dollar Price Forecast: Dollar Falls as Iran Tensions Ease – GBP/USD and EUR/USD Rebound?

Market Overview

The US Dollar Index (DXY) is clinging onto the 99.5-100 mark, having surged a whopping 3% last month – that’s the strongest monthly gain since July 2025. It’s all down to investors seeking safe havens as a result of US-Iran tensions and the supply disruptions that have been rocking the Strait of Hormuz.

Yesterday the dollar slipped back a bit after markets reacted to some key comments from President Trump – he said the conflict could calm down within weeks. & also some signals from Iran that they might be open to talks – that was enough to ease up on the dollar a bit. But what’s still driving inflation expectations is the underlying problem of oil prices staying high – and that’s actually making the Fed look even more likely to keep policy tight for longer.

The Euro and Pound are Taking Their Lead from Interest Rates

The euro is still struggling despite a bit of a rebound, though. The European Central Bank just upped its 2026 inflation forecast to 2.6% while actually lowering growth expectations – that’s raising some real concerns about the potential for stagflation and – well – getting markets to price in some potential rate hikes.

Sterling’s doing a bit better than that. The Bank of England stuck with rates at 3.75% but did warn about rising inflation risks – which is actually shifting expectations away from cutting rates towards further tightening.

Focusing on the Data – Where Will it Take Us?

Today’s US data is going to be the one to watch – markets are going to be comparing what they’re expecting against the numbers that came in last time. And we’re still getting mixed signals from labour and PMI data – so that’s making it hard to call the direction of the dollar – it’s going to be sensitive to any surprises.

US Dollar Index Slips Below 99.60 as Trendline Support Break Signals Weakness

The US Dollar Index (DXY) on the 4-hour chart is trading near $99.49, slipping below a rising trendline that had supported the broader recovery since late February. Recent bearish candles show strong rejection from the $100.60 resistance zone, with consecutive lower highs forming. Price has also moved below the 50-SMA, while the 200-SMA near $99.00 is now the next key support. The breakdown suggests fading bullish momentum, especially as RSI drops sharply toward 40, indicating increasing selling pressure.

If DXY fails to hold above $99.00, the structure may shift toward a deeper correction, with prior consolidation zones coming back into focus.

Trade idea: Sell below $99.50 targeting $98.50, stop above $100.10.

GBP/USD Rebounds From $1.3160 Base as Fibonacci Support Holds Firm

GBP/USD on the 4-hour chart is trading near $1.3294, rebounding from the $1.3160 support after forming a series of bullish candles with long lower wicks, signaling buyer absorption. Price has reclaimed the $1.3280 zone, aligning with the 0.382 Fibonacci level, while pushing toward the $1.3318 resistance. The 50-SMA remains below price but is flattening, suggesting easing downside pressure, while the 200-SMA near $1.3400 continues to cap the broader trend. A descending trendline still acts as dynamic resistance. RSI has rebounded toward 60, reflecting improving momentum.

A sustained move above $1.3318 could open the path toward the 0.5 Fibonacci at $1.3365.

Trade idea: Buy above $1.3320 targeting $1.3365, stop below $1.3250.

EUR/USD Rebounds Toward Key Supply Zone as Bullish Momentum Builds

EUR/USD on the 4-hour chart is trading near $1.1601, rebounding sharply from the $1.1457 trendline support. A series of strong bullish candles with higher lows signals renewed buying interest, pushing price back above the $1.1560 support zone.

The pair is now approaching a descending trendline and a key supply area between $1.1629 and $1.1667, which aligns with the 200-SMA, acting as dynamic resistance. The 50-SMA is turning upward, reflecting improving short-term momentum. RSI has surged above 60, indicating strong buying pressure, though nearing overbought territory.

A break above the supply zone could shift structure toward further upside, while rejection may lead to consolidation.

Trade idea: Buy on breakout above $1.1630 targeting $1.1700, stop below $1.1560.