US Dollar Price Forecast: Dollar Firms as CPI Looms — Can GBP/USD and EUR/USD Hold Support?

Dollar, Euro, Pound Trade as Dollar Firms Ahead of May CPI

The dollar, euro and pound are mixed today with traders awaiting the U.S. May Consumer Price Index report due out later today. The divergent policy paths for each of the currencies and the prospect of further rising inflation have set the tone.

Analysts are expecting the headline May CPI rate to rise 4.2% YoY from April’s 3.8% rate, which is the third consecutive rate hike, driven primarily by higher gasoline prices as a result of the ongoing Iran conflict’s energy shock. The core CPI, which omits the more volatile food and energy costs, is expected to tick up to around 2.9% YoY for May and by 0.3% MoM. This increase could add more fuel to the fire of rising price pressures that may cause the Federal Reserve to delay rate cuts.

The stronger dollar, in turn, will continue to be buoyed by the prospect of U.S. interest rates remaining at high levels for longer to stem the rising price pressures and the corresponding policy divergence with the ECB and Bank of England. The euro faces additional headwinds from euro-zone energy sensitivity and tentative ECB tightening signals, while sterling contends with UK growth concerns amid global uncertainty.

For all three currencies, today’s CPI print will test whether transatlantic divergences deepen or if moderating energy effects offer eventual relief. This is also an important report to observe for the three major currencies given structural support for the dollar due to fiscal deficits and safe haven demand.

DXY Pulls Back to $99.86, 0.382 Fib Tested Within 2h Blue Channel

On the 2-hour timeframe, the DXY stands at $99.86. Following a rejection of the 0.236 Fib level, the pair dipped back to test the 0.382 Fib line around $99.81, characterized by alternating red and green candle bodies. Below price, the 50-period moving average, positioned approximately at $99.55, is providing dynamic support, which aligns with the floor of the blue ascending channel. The candlesticks are forming red wicks with lower highs from the $100.21 swing high, indicating underlying selling pressure. The Relative Strength Index sits at roughly 52, showing neutral momentum without any divergence.

The volume profile places a pivot zone in the $99.56 to $99.68 range, and an upward white trendline originating from recent lows offers further confluence. While the short-term structure is still neutral to bullish provided price stays above $99.56, a retest into that area could still occur before an upside breakout. The overall pattern remains clean within the ascending channel. Despite this pullback, higher lows have been maintained as market participants buy the Fib areas.

Trade Setup: Go long at $99.86 with a target of $100.21 and a stop-loss at $99.56.

GBP/USD Pushes to $1.3397, Bounce Off White Trendline on 2h

In the last 2-hour, the GBP/USD is at $1.3397, and the price continues to trend higher off the white rising trendline that is now hovering just below $1.337, where candles have been rejected. The 50-period red moving average has recently acted as a ceiling, sitting at approximately $1.345 at the present time, while the blue channel provides higher lows and support. There appears to have been some consolidation following the recent volatility, as evidenced by the candle bodies of mixed color. Currently, the RSI sits close to 52, indicating steady momentum.

The most significant support level shown by the volume profile is $1.334. As long as this trendline holds, the price structure should be positive, which is reflected by Fib targets between $1.344 and $1.347. Buyers are likely to continue reacting to any dip in price as long as the series of higher lows persists.

Trade Setup: Go long at $1.3397 with a target of $1.345 and a stop-loss at $1.334.

EUR/USD Back Above $1.1559, 0.382 Fib Protection Seen on 2h

On the 2-hour scale, the EUR/USD sits at $1.1559, and the pair has resumed rallying after bouncing from the 0.382 Fib level near $1.1555 after being rejected from the 0.618 Fib area. The pair’s upward momentum is temporarily stalled by the red 50-period moving average, which sits roughly at $1.158, while the resistance pressure from the blue descending trendline is diminishing. There are several bullish rejection wicks, indicating that buyers are stepping up as support holds, and there is limited follow-through in the downside. The RSI remains neutral at roughly 50.

According to the volume profile, the area from $1.154 to $1.156 represents an active support zone. Price action has been neutral for the most part, though higher lows have been maintained above the $1.150 price level. The alignment of Fib levels and trendlines may help stabilize this range.

Trade Setup: Go long at $1.1559 with a target of $1.1589 and a stop-loss at $1.1520.