US Dollar Price Forecast: DXY Sinks Toward $98.10 – Can GBP/USD and EUR/USD Bulls Charge?

Market Overview

The US Dollar Index (DXY) is seeing a bit of a lifeline in the neighbourhood of 98.30 as the whole US-Iran tension drama and the baloney about the Strait of Hormuz reopening sees investors running for the safety of the dollar once again. Any optimism we saw last week from the ceasefire deal started to fizzle out pretty quickly though as all sorts of incidents at sea and conflicting messages kept the whole region from cooling down.

Meanwhile the truce we did have is due to expire on April 22, so the clock is ticking. On top of all this we’re seeing some oil prices going up which is adding extra pressure to inflation and that is in turn making it look like the Fed is unlikely to cut interest rates anytime soon and therefore the dollar isn’t going to weaken all that much either.

EUR is also being battered around by all this same old hassle, though the ECB are expected to leave policy alone for a bit longer – at least till the late-April meeting – given that its all a bit too tricky with inflation risks still running high because of the high cost of energy. The euro does show a bit of backbone when people start to think that maybe things might ease off a bit but as soon as things get hot again and everyone is running around like headless chickens – the dollar just shoots right back up.

GBP is walking a similar tight rope as the euor – although we do have some reason to be cheerful on the UK front with the economy doing better than expected. However all that high energy costs is still on everyone’s minds and people are getting the jitters about stagflation, and that is not helping things. The fact that people think the BoE might be getting ready to tighten things up a bit is offering some support though. But let’s be honest – the pair is a bit of a rollercoaster ride depending on what happens to the dollar and the price of oil.

In the end its the usual story – markets are on edge waiting for some sort of breakthrough in the US-Iran tension or some sort of diplomatic miracle to sort everything out.

US Dollar Index Forecast: DXY Still Stuck Below 98.40 Resistance

The US Dollar Index is just about treading water near the 98.20-98.40 resistance zone and we’ve seen little forward motion despite a prolonged downtrend overall. Price is still being capped by a descending trendline as well as both the 50 and 200 day EMAs, which all point to bearish pressure and no change to this situation.

Recent price action shows a pretty lackluster reaction when the price does touch resistance – even when the price does pop up a little for a bit, the follow-through is minimal.

The RSI is sort of finding its footing but is a long way from showing any real bullish momentum so far. If we see a rejection from 98.40 we can probably expect to see the DXY pull back towards 97.60 at the very least, possibly even 97.30.

However on the flip side, if price does manage a breakout above 98.40 then we can expect to see a shift in sentiment that might see the price head on up towards 99.20. For now though, you’d have to say the setup is there for selling rallies within the context of a broader downtrend.

GBPUSD Forecast: Sterling is Testing Trendline Support Near 1.3480

GBPUSD is actually testing out the trendline support at the 1.3480-1.3500 zone right now after the recent pullback from those recent highs around 1.3580. Price is still sitting above both the 50 and 200 day EMAs which all points to a pretty healthy medium-term outlook.

However, we are seeing a few bearish candles starting to show up here which is saying that the momentum is weakening and buyers are starting to struggle to keep the price moving up.

The RSI is actually drifting lower now, which is also telling us that the bullish strength is actually waning. Holding above 1.3480 is a pretty big deal if we’re to keep the uptrend alive. If we see a bounce then we can probably expect to see the price try to get back up towards 1.3550 and 1.3600 – but on the flip side if price does break down then we’re probably going to see a pullback down to 1.3400 and possibly even lower.

EURUSD Outlook: Upside Channel Remains Intact Above 1.1730 Support

EURUSD is still holding pretty steady inside an upward sloping channel – and to its credit has managed to keep its head above water above that critical 1.1730 support zone even after the recent pullback. Price is sitting above both the 50 and 200 day EMAs, which is all very bullish – even if we’re seeing some short-term consolidation at the moment.

We did see a bit of a setback near 1.1850 but still, the higher lows that we’re seeing is still intact so we’re not out of the woods just yet. The RSI has cooled off a bit from those overbought levels however, which is probably more of a healthy correction rather than any kind of indication that the trend is going to roll over.

If we get a bounce from 1.1730 then you can probably expect to see the price trying to reach 1.1800 and then 1.1850. But on the flip side, if we were to break below that support level then we could be seeing a much deeper pullback towards 1.1680.