US Dollar Price Forecast: DXY Holds 101.54 as EUR/USD and GBP/USD Face US Midterms

Dollar on the Defensive as Americans Vote; BoE Hike Looms

The dollar traded cautiously on Tuesday as US-Iran tensions and the midterm elections kept investors guarded, a day after it hit a one-month low, Reuters reported. The dollar index, which tracks the greenback against six major currencies, is trading near 101.74. In Sydney, the Reserve Bank of Australia raised its cash rate by a quarter point to 4.85%, its highest since December 2008.

Dollar: Oil Pulls Yields Lower

Falling energy prices eased inflation worries and pushed US Treasury yields lower on Monday. The 10-year yield dropped below 4.88%, its lowest since September 10, and longer-dated yields also hit their lowest since September, Bloomberg reported. Lower yields mean a smaller reward for holding dollar assets, which is why the dollar slipped to a one-month low. “Cheaper energy is reshaping FX dynamics,” OCBC’s Sim Moh Siong said.

What did not happen is just as telling. With yields at a two-month low, the dollar could have broken lower, yet it held above last week’s floor. Reports of a US strike on Iran’s Qeshm Island and the vote itself kept investors cautious. The bigger signals come on Wednesday, when markets get guidance on the midterm results and the Treasury’s quarterly refunding announcement, its plan for how much debt it will sell.

Euro: Fitch Raises the Stakes for Paris

The euro is still weighed down by Fitch’s unscheduled move on Friday to cut France’s outlook to negative from stable while keeping its A+ rating. A negative outlook is a warning that a downgrade is possible. Fitch expects the deficit to stay at 5.5% of GDP in 2027, above the government’s 5% target, and debt to climb to about 124% of GDP by 2028, from 115.7% in 2025. That adds to the pressure on French borrowing costs.

Finance Minister Roland Lescure said the decision “confirms the absolute need to adopt by the end of the year a responsible budget.” Fitch said it believes the budget “should be adopted, thanks to the constitutional mechanisms available to the government” despite the lack of a parliamentary majority, meaning tools that let the government pass a budget without a full vote. Euro zone October flash inflation, the first estimate of price growth, is due Wednesday.

Pound: BoE Expected to Deliver First Hike Since 2023

Final PMI data, a monthly survey of purchasing managers, showed British manufacturers started the fourth quarter with their strongest output growth in more than two years, Reuters reported. Economists polled by Reuters expect the Bank of England to raise rates to 4% from 3.75% on Thursday, its first hike since August 2023.

Companies also expect prices to keep rising. The BoE’s Decision Maker Panel, a monthly survey of company finance chiefs, showed year-ahead inflation expectations rising to 3.3% from 3.1%. Rabobank expects a 7-2 vote among the nine policymakers and a follow-up hike in February. I expect the UK-US rate gap to keep GBP/USD supported this week, since UK rates are set to rise while US yields fall.

US Dollar Index Technical Analysis: DXY Holds 101.54 as Trendline Caps the Rebound

The US Dollar Index is trading near 101.74 on the 4-hour chart, little changed today. Buyers defended the 101.54 zone again on Monday, where the slower moving average, a line that tracks the longer-term average price, also sits. Rebounds are being capped by a falling trendline, a line connecting the lower highs since last week’s 102.48 peak.

The first resistance, where sellers tend to step in, is the trendline near 101.85, then 102.03. The first support, where buyers tend to step in, is 101.54, then 101.18. RSI, a 0 to 100 gauge of buying and selling strength, is near 44 and flat, close to neutral. My bias is a slight bearish lean while DXY stays below 102.03. A close below 101.54 would open 101.18, while a move above 102.03 would point to 102.48.

EUR/USD Technical Analysis: Euro Holds 1.1148 as 1.1223 Caps Gains

EUR/USD is trading near 1.1192 on the 4-hour chart, up slightly today. The pair spiked to about 1.1237 on Monday but could not hold above 1.1223, and it has pulled back. It still sits above the 1.1148 zone and its faster moving average, which follows the more recent price.

Resistance is 1.1223, then 1.1270. Support is 1.1148, then 1.1104. RSI is near 54, mildly positive. The euro keeps a slight bullish lean while it holds 1.1148. A close above 1.1223 would open 1.1270, while a drop below 1.1148 would point to 1.1104.

GBP/USD Technical Analysis: Pound Holds 1.3379 as 1.3435 Caps the Rally

GBP/USD is trading near 1.3414 on the 4-hour chart, up slightly today. The pound briefly rose above 1.3435 on Monday but slipped back, so that level remains a ceiling. A rising trendline from October 14 still supports the move, and both moving averages sit below price.

Resistance is 1.3435, then 1.3474. Support is 1.3379, then 1.3340. RSI is near 61, positive but not stretched. The pound keeps a slight bullish lean while it holds 1.3379, and a close above 1.3435 would open 1.3474.