US Dollar Price Forecast: Slips as Softer CPI Boosts Fed Cut Bets – GBP/USD and EUR/USD

Market Overview

During Wednesday’s Asian session, the US Dollar Index (DXY), which measures the USD against six major currencies, drifted toward 98.00. The move followed increased market confidence in a September Federal Reserve rate cut and softer-than-expected US inflation data.

Cooling Inflation Fuels Policy Shift Bets

US CPI data released Tuesday showed slower price growth, prompting traders to raise expectations for monetary easing. The CME FedWatch Tool now reflects a 94% probability of a 25-basis-point cut next month, up from 85% before the CPI release. These expectations have weighed on the dollar, narrowing its appeal against peers.

Concerns Over Fed Autonomy

Dollar sentiment also weakened after comments from White House spokeswoman Karoline Leavitt, stating President Donald Trump is considering legal action against Fed Chair Jerome Powell over renovations at the central bank’s headquarters. The remarks have raised concerns about potential political influence on monetary policy.

Data and Fed Commentary in Focus

Markets now await speeches from Chicago Fed President Austan Goolsbee and Atlanta Fed President Raphael Bostic for policy guidance. Thursday’s July Producer Price Index will also be closely watched; a stronger print could curb DXY losses, while a weaker reading may reinforce the bearish trend.

US Dollar Index (DXY) – Technical Analysis

The U.S. Dollar Index (DXY) slipped to 97.72, breaking below the ascending trendline support and both the 50-EMA (98.39) and 100-EMA (98.40). This breakdown suggests weakening bullish momentum, with the RSI at 45.85 pointing toward a potential shift toward bearish control.

If price fails to reclaim the 97.95–98.00 zone, sellers may target 97.50 initially, followed by 97.12 and the key 96.65 support. Short-term consolidation between 97.95 and 97.50 is possible before any decisive drop. A sustained move above 98.00 would be needed to re-challenge 98.70 and break the downtrend channel.

Overall, the technical setup leans bearish unless DXY recovers above the EMA cluster, making further downside toward 96.65 a likely scenario.

GBP/USD Technical Analysis

GBP/USD extended its rally to 1.3550, building on a sharp rebound from early August lows near 1.3221. The pair trades above key EMAs, reinforcing a bullish bias, with RSI at 66 signaling strong momentum but nearing overbought territory. Immediate resistance stands at 1.3587, a break of which could target 1.3678.

Support lies at 1.3489 and 1.3399, offering potential dip-buying zones. While sentiment favors buyers, overextension risks remain, making pullbacks likely in the short term. As long as the ascending trendline holds, the broader outlook stays bullish.

A failure to sustain above support could shift momentum, but for now, trend-followers will be eyeing 1.3587 as the key level for the next leg higher.

EUR/USD Technical Forecast

EUR/USD has broken above the descending trendline resistance near 1.1685, supported by the 50-EMA at 1.1627 and the 100-EMA at 1.1623. Price is holding above the short-term ascending trendline, suggesting bullish pressure remains intact. The RSI at 66 shows momentum leaning towards overbought territory but not yet signaling exhaustion.

Immediate resistance lies at 1.1778, followed by 1.1833, with a potential path toward 1.1895 if buying pressure continues. On the downside, 1.1680 and 1.1600 serve as key support levels.

A retest of the breakout zone could offer a higher low setup before the next push upward. Sustained closes above 1.1778 would strengthen the case for extended gains toward the upper resistance band.