US Dollar Price Forecast: DXY Slips Below $97 After Fed Signals – Can GBP/USD and EUR/USD Rally?

Market Overview

Despite some positive factors, the broad-based US dollar failed to extend its downward trend and turned bearish. As of now, the US Dollar Index (DXY), which tracks the value of the US Dollar (USD) against six major currencies, is slightly lower after two days of gains, trading near 97.50 on Tuesday.

Economic Data Shows Strength, But Dollar Weakens

Despite strong US economic data, the dollar has struggled to maintain its recent gains. On the data front, the ISM Manufacturing PMI rose to 52.6 in January from 47.9 in December, beating expectations of 48.5. Moreover, the 10-year US Treasury yield increased nearly 1% in the previous session.

Hence, the economic numbers are positive but failed to support dollar.

Fed Policy Signals Keep the Dollar in Check

On the other side, the ongoing signals from the Federal Reserve could be one of the main reasons behind the Dollar’s fall. US President Donald Trump nominated Kevin Warsh as the next Fed Chair. Markets interpreted his appointment as a sign of a cautious approach to monetary policy, which limited expectations for aggressive rate hikes.

Besides this, Fed officials’ comments have also contributed to the dollar’s decline. St. Louis Fed President Alberto Musalem said further rate cuts are unnecessary, calling the 3.50%–3.75% policy range neutral. Therefore, uncertainty over the Fed’s next steps has weighed on the Dollar.

Improved Risk Sentiment Reduces Demand for the Dollar

Moreover, the losses in the dollar were further bolstered by the improving market risk sentiment. The US Senate reached a deal to move forward with a government funding package, avoiding a shutdown.

Besides this, President Trump announced a trade deal with India that lowered tariffs on both sides, while India agreed to stop buying Russian oil.

As a result, investors are moving money into riskier assets like stocks, which has lowered demand for the Dollar as a safe-haven.

US Dollar Index Forecast: DXY Stalls Near $97.40 as Downtrend Pressure Persists

The US Dollar Index (DXY) is trading around $97.4 and is having trouble extending its rebound after a sharp drop from the $99.8 high. On the 2-hour chart, the price is still below a falling trendline and the 200-EMA near $98.2, which keeps the overall trend bearish.

Recent candles show smaller bodies near resistance, signaling hesitation rather than strong buying. DXY is hovering around the 0.5 Fibonacci retracement at $97.2, with deeper support at $96.8 and $96.3 (0.236 Fib).

The RSI has risen to about 55, which shows momentum is improving, but it is not yet overbought. A clear move above $97.6 is needed to change the outlook, while a rejection would keep downside risks in play.

Trade idea: Consider selling near $97.6, with a target of $96.8. The idea is invalid if the price rises above $98.0.

GBP/USD Forecast: $1.36 Trendline Support Holds as Bulls Rebuild Momentum

GBP/USD is trading around $1.3695 and has steadied after falling from the $1.3860 peak. On the 2-hour chart, the price remains above a rising trendline and the 200-EMA near $1.3600, which keeps the overall bullish trend in place.

Recent candlesticks have smaller bodies and lower wicks near $1.3650, which suggests buyers are entering on dips instead of strong selling. The Fibonacci retracement marks $1.3685 (0.382) as short-term support, and resistance is at $1.3750.

The 50-EMA is flat and acts as short-term resistance. The RSI has moved up from about 40 to 45, which shows that downward pressure is easing, but there is still limited upward momentum.

Trade idea: Consider buying near $1.3650, with a target of $1.3800. The idea is invalid if the price falls below $1.3580.

EUR/USD Forecast: $1.18 Trendline Support Holds as Bulls Eye $1.20 Retest

EUR/USD is trading around $1.1815 and has steadied after dropping from the $1.2050 high. On the 2-hour chart, the price is staying above a rising trendline and the 200-EMA near $1.1780, which shows that buyers are supporting the overall uptrend.

Recent candlesticks have smaller bodies and long lower wicks near support, which suggests buyers are stepping in on dips instead of heavy selling. The 50-EMA is flat and acts as short-term resistance near $1.1895, while support is at $1.1775. The RSI is rising from around 40, showing that downward momentum is easing, but there is not yet strong buying pressure.

If EUR/USD moves above $1.19 and holds, it could head toward $1.2000. But if it falls below the trendline support, the bullish outlook would weaken.

Trade idea: Consider buying above $1.1780, with a target of $1.1950. The idea is invalid if the price drops below $1.1720.