US Dollar Price Forecast: DXY Holds 98.00 as Fed Stays Hawkish – GBP/USD and EUR/USD Outlook Slide Continues?

Market Overview

The US dollar continues to push on up – staying well above the 98.00 level as it keeps its bullish trend going and that’s not about to change anytime soon . The reasons behind the dollar’s upward momentum are multifaceted, starting with key economic indicators. Firstly, a look at recent data from the US Department of Labor showed that Initial Jobless Claims had plummeted to 206,000 for the week ending February 14.

This is an enormous drop from the previous week’s revised figure of 229,000 and even better than the 225,000 that analysts had forecasted. What this tells us is that the US labour market is in pretty good shape, which generally bodes well for the US dollar.

US Dollar Stays Strong as Fed Takes a Cautious Approach to Raising Interest Rates

And it gets better – the FOMC minutes from their January meeting revealed that there’s no rush for the Fed to start lowering interest rates anytime soon. With inflation still sitting above the Fed’s target of 2%, the central bank is keen to keep things steady for now – and that’s exactly what the US dollar needs .

Traders are now pretty much just waiting for the preliminary US Q4 GDP and Personal Consumption Expenditures (PCE) numbers to drop on Friday to get a better idea of the state of the US economy and what’s happening with inflation.

By the way, the FOMC minutes also highlighted that most Fed policymakers are in favour of keeping interest rates where they are, while a small minority are starting to consider a cut. And what this shows us is that the Federal Reserve is being mighty cautious. Which means, effectively, that they won’t be lowering interest rates unless inflation really starts to come down.

US Dollar Index (DXY) Tests 98.00 Resistance – Break Above 0.618 Fibonacci or Reversal?

The US Dollar Index is hovering around 97.90-98.00 on the 4-hour chart, approaching 98.08 resistance after bouncing back from the 95.54 low. Price has reclaimed the 0.618 Fib at 97.61, which should be a good sign, indicating its real momentum is starting to strengthen.

There are those higher lows happening along a rising trendline and they’re actually supporting the overall short-term outlook. The 50-period EMA that sits around 97.20 is basically underpinning the whole move, while that 200-period EMA at 98.47 is still looming large as key resistance.

The RSI at 60 is showing steady, bullish momentum. If DXY can somehow break above that barrier at 98.08, then 98.47 might be the target, but if price gets rejected – we could see it heading back down to 97.21.

Trade idea: Looking to buy above 98.10 and set a target of 98.50, stop-loss below 97.20.

GBP/USD Price Forecast: Breaks 1.3516 Support – Bearish Pressure Builds

GBP/USD is trading around 1.3470 on the 4-hour chart after breaking below key support at 1.3516. Price has also slipped under the trendline from mid-Jan that was previously supporting the bulls – and that tells us the current trend is starting to reverse.

The 50-period EMA is now turning lower around 1.3600, while the 200-period EMA at 1.3580 is now proving to be a bit of a bugbear for the bulls. Looking at the candlesticks – we can see that those lower highs are now looking more frequent, and the selling pressure is quite firm. That RSI is below 50, and it continues to reflect the bearish bias.

Immediate support is sitting pretty at 1.3435, with a subsequent stop at 1.3391. If we can get back above 1.3516 then maybe that bearish pressure will start to ease a bit.

Trade idea: Looking to sell below 1.3460 targeting 1.3390, with a stop-loss above 1.3520.

EUR/USD Price Forecast: Slips Below 1.1806 Support – Bears Target 1.1742

Things aren’t looking so great for EUR/USD right now, which is trading around 1.1760 on the 4-hour chart, having broken below that key 1.1806 support zone. The 50-period EMA is now turning lower around 1.1850, while the 200-period EMA at 1.1800 has just become a bit of a hurdle for the bulls.

That RSI is indeed looking a bit below 50, which just goes to show that bearish momentum is possible here – even without things getting too crazy.

Immediate support is lurking at 1.1742, with a subsequent stop at 1.1672. If the price can somehow get back above 1.1806 then we might start to see that bearish pressure ease up.

Trade idea: Looking to sell below 1.1755 targeting 1.1675, with a stop-loss above 1.1810.