US Dollar Price Forecast: Risk Sentiment Shifts with Ceasefire — GBP/USD and EUR/USD Outlook?

Currencies Test Divergence After ECB Move

The US dollar, Euro, and the GBP have all experienced moves on Friday, June 16 as central bank policy trends shift after the ECB hiked rates on Thursday, their first since 2023, alongside ongoing inflationary effects of energy markets. The ECB raised the deposit facility rate 25 basis points to fight second-round effects of higher oil prices with limited room for aggressive tightening due to growth issues in the euro zone.

The greenback is helped by strong U.S. fundamentals with expectations that the Fed would likely wait on their rate decision on Wednesday and remain cautious, as the US is dealing with a fiscal deficit and persistent core inflation. Liquidity depth and reserve currency status along with safe-haven status during times of heightened geopolitical concerns has strengthened the greenback and may limit short-term prospects of rate cuts as a result.

The pound is also facing country-specific issues, and the Bank of England will meet this week where they would most likely wait as they face services inflation risks in a lower growth UK. This week, both the GBP and the EUR need strong hints and actions to suggest that the path will lead to restrictive policies that would help contain inflation and stabilize growth concerns to avoid market divergence.

This will be an important week for all three currencies as global markets face continued geopolitical tensions and a global environment that is more conducive to a stronger dollar. The U.S. is not facing the same fiscal and energy challenges as Europe, which is likely to keep dollar appreciation out in the world as it currently stands. For now, the ECB and Bank of England are looking at ways to fight inflation with tighter monetary policies while the market continues to look for the next Fed move.

DXY Steady at $99.58 – Moving Average Retest Supports Bullish Structure on the 4H Chart

DXY remains firm at $99.58, where a moving average retest on the 4H chart suggests support for a bullish trend. On the 4-hour chart, DXY is currently trading at $99.58, with mixed bullish and bearish candles challenging the $99.79 level of the 50-period moving average immediately after a potent breakout candle. The current rally from the $99.16 swing low has created multiple higher highs which signal that buyers are still in control. Support is still present from the trending line and price continues to hold past the prior resistance levels.

On the other hand, RSI is at approximately 52 which implies a neutral to bullish trend. Additionally, $99.38-$99.59 represents a solid consolidation zone on the volume profile. Next Fibonacci targets are found between 100.03-100.31. The pattern in the overall picture is that of bullish, staying above the $99.38 mark and bounded by a trend channel, although any pullback has the potential to be countered by buyers. In the meantime, the bullish trend with higher lows and higher highs seems to be a good option for buyers to get in on a pullback.

Trade Idea: Buy at $99.58, targeting $100.31, with a stop-loss at $99.38.

GBP/USD Holds at $1.3417 – Ascending Channel Support Remains Intact on the 1H Chart

GBP/USD is maintaining $1.3417 as price action respects support from an ascending channel on the 1H chart. At $1.3417, 1-hour chart shows price action with mixed candles defending a trendline support at $1.3380, facing resistance from the 50-period moving average at around $1.3450. Some bullish rejection wicks are also seen showing that there was some buying at that level while keeping the trend of higher lows within the channel.

Additionally, RSI is at about 52, indicating a neutral to positive trend. Moreover, $1.3380 is seen as support on the volume profile while the next resistance area is found between $1.3440 and $1.3470. The overall picture is neutral to bullish, bounded by trendline support, and with higher lows continuing to support the positive outlook.

Trade Idea: Buy at $1.3417, targeting $1.3450, with a stop-loss at $1.3380.

EUR/USD Dips to $1.1604 – Descending Trendline Keeps Upside Limited on the 2H Chart

EUR/USD retreats to $1.1604 and continues to be bounded by a descending trendline on the 2H chart. The 2-hour chart shows price action at $1.1604 with bearish candles testing a descending trendline near $1.1580 which came as resistance was faced near the 50-period moving average. Some selling pressure can be seen with the bearish rejection wicks and lower highs. However, current price levels remain well above recent swing lows.

Meanwhile, RSI is at around 48, implying a neutral sentiment and no trend. Moreover, $1.1550-$1.1570 is seen as a key pivot region on the volume profile, with the $1.1550 level reinforced by Fibonacci levels. The overall picture is neutral to bearish, bounded by the $1.1580 mark with some consolidation in the current channel range. Although the momentum to the downside may still be slow, sellers have shown to be active on rallies with the help of some rejection wicks at current resistance level.

Trade Idea: Buy at $1.1604, targeting $1.1645, with a stop-loss at $1.1550.