US Dollar Price Forecast: Gains on PMI Hopes but Fed Cuts Loom – GBP/USD and EUR/USD

Market Overview

During early Asian trading on Tuesday, the US Dollar Index (DXY), which tracks the USD against six major currencies, edged higher to around 97.80.

The move followed its weakest level since July 28, as markets shifted focus to the upcoming US ISM Manufacturing PMI for August.

Geopolitical Risks Support the Dollar

The modest rebound was supported by renewed geopolitical tensions in Eastern Europe. Russian drone strikes over the weekend damaged Ukrainian power facilities, cutting electricity to nearly 60,000 households, according to reports. In response, Kyiv pledged further retaliatory action.

These developments increased safe-haven flows into the US Dollar, though investors remain wary that prolonged instability could dampen broader market sentiment and growth prospects.

Fed Rate Cut Bets Limit Upside

Despite the geopolitical lift, expectations of Federal Reserve easing capped the dollar’s advance. The CME FedWatch Tool shows markets pricing an 89% chance of a 25-basis-point rate cut in September, up from 85% before last week’s US PCE inflation data.

The growing likelihood of policy easing suggests the Fed may prioritize supporting growth, weighing on the greenback.

Data Releases in Focus

Attention now turns to upcoming US data. The ISM Manufacturing PMI for August, due today, will gauge industrial health, while Friday’s Nonfarm Payrolls remains the key event.

Economists project a modest 75,000 job gain and unemployment at 4.3%.

A soft report could reinforce the case for rate cuts, while stronger data may offer temporary support to the dollar.

US Dollar Index (DXY) – Technical Analysis

The U.S. Dollar Index (DXY) is trading near 98.19, rebounding from support at 97.54. Price action remains compressed inside a symmetrical triangle, with resistance around 98.71 and support steady near 97.54. Both the 50-EMA (98.00) and 200-EMA (98.19) are converging, creating a technical pivot zone that could determine the next move.

The RSI has bounced to 59, reflecting improving momentum after oversold conditions earlier in the week. A breakout above 98.71 could drive gains toward 99.12 and 99.54, while a breakdown below 97.54 would expose 97.13 and 96.74.

GBP/USD Technical Analysis

GBP/USD is trading at $1.3423, breaking below its ascending trendline support after failing to sustain above $1.3505. The move also pushed price under the 50-EMA at $1.3494, with the 200-EMA at $1.3470 now acting as resistance.

Momentum indicators confirm weakness, as the RSI dropped sharply to 33, signaling growing bearish pressure. If sellers hold below $1.3470, downside targets emerge at $1.3313 and $1.3230.

A rebound above $1.3500 would be needed to shift momentum back toward $1.3639. For now, the technical breakdown suggests the pair is vulnerable, with bears taking control after losing key support levels.

EUR/USD Technical Forecast

EUR/USD is trading at $1.1652, slipping after testing resistance near $1.1706. The pair remains above its ascending trendline, which has supported price since late July, but selling pressure is testing that floor. The 50-EMA at $1.1668 and the 200-EMA at $1.1641 form a key pivot zone, with price hovering between them.

Momentum is weakening, as the RSI has dropped to 44, signaling growing bearish pressure. If the pair closes below $1.1640, downside targets emerge at $1.1580 and $1.1521.

A rebound above $1.1700 would reopen the path toward $1.1741 and $1.1790. For now, the trendline support is the key level holding the bullish structure intact.