US Dollar Price Forecast: Dovish Fed and Shutdown Pressure the Greenback – GBP/USD and EUR/USD

Market Overview

During the Asian trading session, the US Dollar Index (DXY) slipped further to around 98.10, marking its fourth straight day of losses. Investors remain wary as the prolonged US government shutdown, speculation over Federal Reserve rate cuts, and renewed US-China trade tensions weigh on sentiment.

Government Shutdown Deepens Market Uncertainty

The federal shutdown has entered its 16th day, stalling key economic data releases and complicating policy decisions. The Senate has failed ten times to pass a funding bill, keeping federal operations suspended and injecting uncertainty into financial markets. While the Dollar has not yet seen sharp declines, traders are growing increasingly cautious as the impasse threatens to slow economic activity.

Rate Cut Expectations Pressure the Greenback

Fed Governor Christopher Waller and new member Stephen Miran have both hinted at further rate reductions, signaling a more dovish policy outlook. The latest Beige Book also pointed to rising layoffs and weaker household spending, reinforcing expectations that the Fed could ease policy soon.

US-China Tensions Add to Caution

Washington’s criticism of the potential for rare earth export limits has fueled concerns over supply chain disruptions. Though negotiations remain possible, rising trade friction continues to dampen investor confidence, keeping the Dollar under sustained pressure.

US Dollar Index (DXY) – Technical Analysis

The U.S. Dollar Index (DXY) has fallen below both its 50-EMA and 200-EMA, signaling continued bearish momentum. The index recently broke below the key 98.68 support, which now acts as resistance.

Price is hovering around the 98.00 psychological level, a zone that aligns with a prior demand area seen in late September. RSI sits near 30, indicating oversold conditions and hinting at a potential short-term rebound. However, if the index fails to reclaim 98.68, it could extend lower toward 97.47 and 97.02.

A minor pullback toward 98.40–98.60 may occur before sellers attempt another push lower, as overall bias remains negative while below the moving averages.

GBP/USD Technical Analysis

The GBP/USD pair trades near $1.3415 after breaking above its descending trendline, signaling early signs of a bullish reversal. The pair has reclaimed both the 50-EMA at $1.3391 and the 200-EMA at $1.3410, showing improving momentum.

However, RSI near 63 suggests the pair could face short-term consolidation before extending higher. If buyers hold above $1.3387, the next upside targets lie at $1.3516 and $1.3593. A brief pullback toward the $1.3390–$1.3410 region could offer a retest opportunity before continuation.

On the downside, failure to defend $1.3380 may drag the pair toward $1.3290. Overall, the short-term bias remains bullish while price sustains above the key EMAs.

EUR/USD Technical Forecast

The EUR/USD pair has broken above its descending channel, signaling a potential short-term bullish reversal. The pair trades near $1.1706, above both the 50-EMA at $1.1647 and the 200-EMA at $1.1665, confirming improving momentum.

The RSI stands around 72, showing overbought conditions that could trigger a brief pullback before continuation. If buyers hold above $1.1670, the next resistance lies at $1.1778, followed by $1.1838. A minor dip toward $1.1660 could offer a retest opportunity for buyers.

However, failure to hold above $1.1630 may return the pair to the broader bearish structure. Overall, EUR/USD remains bullish in the short term while staying above the $1.1640–$1.1660 zone.