US Dollar Price Forecast: DXY Nears $101 Ahead of FOMC Meeting Minutes — Can GBP/USD and EUR/USD Recover?

Dollar, Euro and Pound Navigate Divergent Central Bank Paths

On July 8, the dollar, euro, and sterling were underpinned by different monetary policy settings and economic conditions. Core inflation has remained elevated in the U.S., meaning the Fed is disinclined to ease rates in any near term, keeping a more hawkish setting and dollar attractive as a reserve currency, alongside a strong economy and fiscal balance sheet.

The euro was hampered by heterogeneous growth across the euro zone as the ECB looks to keep inflation expectations anchored. Divergent fiscal settings and inflation rates in the bloc add to a transmission effect, making the currency more data and wage-dependent.

Sterling is caught between sticky services inflation and weaker growth, with the BoE weighing the labour market data and fiscal policy. The relative policy stance of the Fed, ECB and BoE is likely to continue to underpin cross-rates.

All in all, different inflation trajectories, fiscal positions and economic resiliencies will likely lead to two-way risk in the currencies, with other variables like trade balances and capital flows likely to contribute to currency dispersion.

DXY Holds $101.04 – Fibonacci 0.618 Retest on 4h

DXY is trading at $101.04 on the 4-hour time frame. The 4-hour candles, which are colored mixed red and green, retested the .618 Fib level at $100.31 following a massive breakout off the $97.67 swing low. The candles with bullish color and higher highs indicate buyers continue to respect the 50ema at $101.02. The RSI is near 52 with neutral momentum.

In terms of volume profile, the breakout pivot is around $100.59 to $101.06. The .618 Fib suggests that $103.09 will be the next upside target in the next few weeks. Above $100.59, the price action is in a clean, strongly bullish channel. The higher highs and higher lows pattern indicates that buyers are firmly in control.

Trade Idea: Buy $101.04, targeting $103.09, with a stop at $100.59.

GBP/USD Holds $1.3360 – White Descending Trendline Test on 4h

The GBP/USD is trading at $1.3360 on the 4-hour time frame. The 4-hour candles, which are colored mixed red and green, tested the white trendline at $1.3380 after rejection of the red ma at $1.337. The 4-hour candle with a bullish wick indicates the absorption of buy orders at the resistance, and the 4-hour candles maintain higher highs.

The RSI is near 57 with neutral momentum. In terms of volume profile, the pivot cluster is at $1.331 to $1.338. The next support level is expected to be in the $1.325 to $1.331 area. Within the overall trading range, the price is in a neutral to bullish structure above the trendline, with higher highs indicating that buyers are active on dips.

Trade Idea: Buy $1.3360, targeting $1.345, with a stop at $1.325.

EUR/USD Holds $1.1418 – EMA 50 Defense on 4h

The EUR/USD is trading at $1.1418 on the 4-hour time frame. The 4-hour candles, which are colored mixed red and green, defended the 50ema at $1.1423 after rejection of the red ma at $1.162. The 4-hour candle with a bullish wick indicates the absorption of buy orders, and the 4-hour candles maintain higher lows. The RSI is near 50 with neutral momentum.

In terms of volume profile, the pivot cluster is at $1.140 to $1.150. The next resistance level is expected to be in the $1.155 to $1.162 area. Despite a downtrend, the price is in a neutral to bullish structure above the 50ema, with higher lows indicating that buyers are active on dips.

Trade Idea: Buy $1.1418, targeting $1.155, with a stop at $1.140.