US Dollar Price Forecast: Falls as Fed Signals Caution, Tariff Risks Grow – GBP/USD and EUR/USD

Market Overview

During Wednesday’s Asian session, the U.S. Dollar Index (DXY) edged down to 98.55, snapping a four-day winning streak. The pullback follows June’s CPI data, which showed annual inflation rising to 2.7%, up from 2.4% in May. Core CPI also ticked higher to 2.9%.

While inflation remains firm, the Dollar lost momentum amid mixed expectations on monetary policy and key economic reports ahead, including the PPI, industrial production, and the Fed’s Beige Book.

Fed Signals “Actively Patient” Policy Path

Federal Reserve officials adopted a cautious tone. Boston Fed President Susan Collins noted policy uncertainty and called for an “actively patient” approach, suggesting no imminent moves. Dallas Fed’s Lorie Logan echoed the need to keep rates elevated, especially with potential inflationary pressure from upcoming tariffs.

As a result, traders now price in only 43 basis points of rate cuts by December—down from 50 earlier this week.

Tariff Threats Inject Trade Uncertainty

Adding to pressure on the Dollar, former President Donald Trump signaled new tariffs on pharmaceutical imports and hinted at possible levies on semiconductors.

While aimed at domestic industry support, these measures raise fresh concerns over trade retaliation and global economic stability.

With monetary policy and trade outlooks both clouded, the Dollar faces growing near-term headwinds.

US Dollar Index (DXY) – Technical Analysis

The U.S. Dollar Index (DXY) continues to respect its upward-sloping channel on the 2-hour chart, with price maintaining higher highs and higher lows since early July. After briefly piercing through the channel’s midline, the index surged above the $98.70 level, only to face moderate rejection below $98.70–$98.90, a key resistance zone that aligns with a previous consolidation zone from late May.

Support is seen near the $98.20 area, closely followed by the channel midline and the 50-period EMA at $98.06. If the DXY holds this zone, the structure remains bullish. A decisive move above $98.90 could expose the psychological $99.08 level next, while a drop below $98.15 may suggest weakening momentum.

GBP/USD Technical Analysis

GBP/USD remains confined within a descending channel on the 2-hour chart, reinforcing bearish momentum. After a failed breakout near the 1.3417 resistance, the pair reversed sharply and is now trading just below the channel’s midline. The 50-period EMA at 1.3468 and the 200-period EMA at 1.3555 remain far above, reflecting strong downside pressure.

A clean rejection from the highlighted supply zone between 1.3417 and 1.3456 has validated this region as key resistance. If price continues to respect this channel, a move toward the lower boundary near 1.3340 appears likely.

Only a decisive break above 1.3456 and the 50-EMA would suggest a shift in short-term bias. Until then, bears remain in control.

EUR/USD Technical Forecast

EUR/USD continues to trade within a well-defined descending channel on the 2-hour chart, confirming the bearish bias. After bouncing off the 1.1596 support zone, the pair is now testing the midline of the channel near 1.1630, which also coincides with minor horizontal resistance.

The 50-period EMA at 1.1665 and the 200-period EMA at 1.1670 remain above current price action, reinforcing downward pressure. A sustained rejection at 1.1630–1.1665 could prompt another leg down toward 1.1569 or even 1.1540 if selling resumes.

However, a clean break above the upper channel line and 1.1670 would invalidate the bearish structure and suggest a potential short-term reversal. Price action remains weak until that threshold is decisively broken.