US Dollar Forecast: Fed Rate Cut Odds Hit 87% After Powell Speech, GBP/USD and EUR/USD

Market Overview

During the Asian session on Monday, the US Dollar Index (DXY) traded slightly higher but hovered near a four-week low, slipping below the 98.00 mark. The Greenback remains pressured as markets digest comments from Federal Reserve Chair Jerome Powell, who signaled that policy adjustments may be needed amid shifting risks to inflation and employment.

Powell’s Jackson Hole Remarks

Powell noted that while inflation remains a concern, risks to the labor market are rising. He acknowledged that the Fed’s current stance is “very restrictive” and suggested a shift could come soon.

Markets interpreted the remarks as dovish, with growing conviction that rate cuts could begin as early as September.

Market Bets on Fed Easing

The CME FedWatch Tool shows investors now assign an 87% probability of a September rate cut. This has weighed on the dollar, limiting its ability to recover despite modest gains in early trading. A softer policy stance may support growth but also risks prolonging dollar weakness.

Key Data Ahead

This week, traders will focus on US Durable Goods Orders and the PCE Price Index, the Fed’s preferred inflation measure. Stronger readings could temper easing bets, while softer data may reinforce them.

Canada’s Q2 GDP, due Friday, will also be in focus, with potential to boost the Canadian dollar against a fragile Greenback.

US Dollar Index (DXY) – Technical Analysis

The U.S. Dollar Index (DXY) is consolidating around 97.90 after a sharp rejection from the 98.80 resistance. On the 4-hour chart, price remains capped by a descending trendline from early August, while support has formed at 97.65.

The 50-EMA at 98.18 and the 100-EMA at 98.23 are clustering overhead, reinforcing this zone as a key pivot area.

Momentum indicators are mixed. The RSI sits near 42, recovering from oversold levels, but not yet signaling strong buying pressure. For traders, holding above 97.65 keeps the structure intact, but a break below risks a slide toward 97.12. A close above 98.30 would shift focus back toward 99.00.

GBP/USD Technical Analysis

The British pound is consolidating near $1.3500 after a strong rebound from $1.3390. On the 4-hour chart, the pair is testing the upper boundary of a rising channel, with the 50-EMA at $1.3476 and the 100-EMA at $1.3462 now acting as immediate supports. This confluence strengthens the case for bullish continuation if price holds above these levels.

Momentum is supportive, with the RSI at 55 pointing upward, showing steady strength without overbought pressure.

For traders, the key lies in a close above $1.3530. Such a move could extend gains toward $1.3590 and $1.3647. On the downside, slipping under $1.3460 risks a deeper pullback toward $1.3390.

EUR/USD Technical Forecast

The euro is consolidating around $1.1700 after a sharp rebound from $1.1580 support. On the 4-hour chart, price has reclaimed ground above both the 50-EMA at $1.1656 and the 100-EMA at $1.1647, signaling improving short-term momentum. A rising trendline from early August continues to underpin the pair, creating a series of higher lows.

The RSI sits near 59, showing steady momentum without flashing overbought conditions, while the MACD is recovering toward neutral, hinting at stabilization. Price is currently testing resistance at $1.1730, a zone that capped earlier rallies.

For traders, holding above $1.1650 keeps the structure constructive. A confirmed break above $1.1730 could target $1.1780, while failure here risks a pullback toward $1.1650.