US Dollar Price Forecast: Extends Losses as Fed Rate Cut Bets Weigh, GBP/USD and EUR/USD

Market Overview

The US Dollar Index (DXY) slipped toward 97.40 in early Asian tr ading, pressured by expectations of near-term rate cuts from the Federal Reserve. Traders are now awaiting Wednesday’s US Producer Price Index (PPI) release, which may influence the dollar’s next direction.

Weak Labor Data Fuels Fed Rate Cut Bets

The dollar’s weakness follows last week’s disappointing jobs report. August Nonfarm Payrolls showed slower hiring, while unemployment rose to its highest level since 2021. The data has reinforced concerns over a cooling labor market and added to pressure on the Fed to ease policy.

According to LSEG estimates, futures markets price in a 90% chance of a 25-basis-point cut this month and a 10% chance of a 50-bps move. This dovish outlook has weighed heavily on the DXY.

PPI Data in Focus

Markets now turn to the PPI report, expected to rise 3.3% year-on-year in August, with the core reading seen at 3.5%. Stronger-than-expected figures could briefly support the dollar by tempering rate cut expectations.

Outlook

For now, weak labor market data and high odds of Fed easing keep the US Dollar under pressure. The DXY’s near-term trajectory remains highly sensitive to incoming inflation reports, with even small surprises likely to spark volatility.

US Dollar Index (DXY) – Technical Analysis

The U.S. Dollar Index is trading around 97.31, holding below the 50-EMA at 97.62 and the 200-EMA at 97.93. Price remains capped within a descending channel, with key resistance near 97.52 and support at 97.25. A break below 97.25 could expose the 97.08 and 96.90 levels, while recovery above 97.52 would suggest strength toward 97.72.

The RSI is hovering near 39, signaling weak momentum but not yet oversold, leaving room for further downside. Sellers remain in control while the index stays under the EMAs, with short-term bias tilted lower unless buyers reclaim 97.52 resistance.

GBP/USD Technical Analysis

GBP/USD is trading around $1.3581, holding within an upward channel. The 50-EMA at $1.3527 and the 200-EMA at $1.3487 provide solid support. Key resistance sits at $1.3600, followed by $1.3638. On the downside, support is at $1.3557 and $1.3518.

A sustained move above $1.3600 could open the way toward $1.3683, while a drop under $1.3557 may invite selling pressure. The RSI at 66 suggests bullish momentum but is approaching near-overbought territory, leaving room for cautious gains.

As long as the pair trades above the rising trendline, the short-term outlook remains constructive, with buyers targeting higher levels if $1.3600 breaks.

EUR/USD Technical Forecast

EUR/USD is trading around $1.1763, holding above the 50-EMA at $1.1735 and the 200-EMA at $1.1691. The pair remains supported by a rising trendline from recent lows. Key resistance is seen at $1.1780 and $1.1805, while support rests at $1.1744 and $1.1723. A break below the trendline could expose $1.1703.

The RSI sits near 56, showing moderate bullish momentum but not yet overbought. As long as price stays above $1.1744, buyers may attempt another move toward $1.1780, with a breakout paving the way for $1.1820. Failure to hold $1.1744 would weaken the short-term structure.