US Dollar Price Forecast: Weakens Ahead of Fed Rate Cut Bets, GBP/USD and EUR/USD

Market Overview

During Thursday’s Asian session, the US Dollar Index (DXY), which tracks the Greenback against six major peers, traded 0.12% lower near 98.00. The pullback reflects investor caution ahead of Friday’s release of July’s Personal Consumption Expenditures (PCE) inflation data.

Economists expect core PCE, the Fed’s preferred measure, to rise 2.9% year-on-year, slightly above June’s 2.8%, with monthly growth steady at 0.3%. The outcome will be pivotal for shaping near-term policy expectations.

Fed Cut Odds Rise, Officials Remain Cautious

According to the CME FedWatch Tool, markets now assign an 87% probability of a September rate cut. However, Fed officials remain guarded.

New York Fed President John Williams stressed that policymakers need additional data before making decisions, noting risks are “more in balance.”

Political Tensions Cloud Dollar Outlook

The Dollar also faces pressure from political uncertainty. President Donald Trump has moved to dismiss Fed Governor Lisa Cook over mortgage-related allegations, marking an unprecedented challenge to the central bank’s independence.

Cook has denied wrongdoing and is expected to contest the decision legally, raising concerns over political interference in monetary policy.

Fundamental Outlook

Friday’s PCE data will set the tone. A stronger print could ease rate cut bets and lift the Dollar, while weaker results would reinforce dovish expectations and weigh further on the Greenback.

US Dollar Index (DXY) – Technical Analysis

The U.S. Dollar Index (DXY) trades around $98.15, struggling to gain momentum as it hovers near the 50-EMA at $98.23 and 100-EMA at $98.25. The chart shows a descending triangle, with lower highs pressuring the upside while support near $97.64 continues to hold.

The RSI sits at 47, reflecting a neutral stance, while the MACD remains flat, signaling indecision. Price action suggests the dollar is coiling ahead of a potential breakout. A move above $98.60 could open a path toward $99.00, while a failure below $97.64 risks weakness toward $97.12.

GBP/USD Technical Analysis

GBP/USD is trading near $1.3503, finding support from an ascending trendline that has guided the pair higher since mid-August. The pair remains above its 50-EMA at $1.3477 and 100-EMA at $1.3467, reinforcing a constructive bias.

The RSI at 56 signals moderate bullish momentum, while the MACD histogram shows early signs of recovery after previous weakness. Price action suggests buyers are gradually building control, with resistance sitting at $1.3594. A breakout above this zone could encourage a move toward $1.3673, while holding above $1.3470 keeps the trend supportive.

On the downside, a break beneath the ascending trendline would shift momentum, exposing $1.3427 and possibly $1.3314 if selling pressure increases.

EUR/USD Technical Forecast

The EUR/USD trades around $1.1638, consolidating between the 50-EMA at $1.1644 and 100-EMA at $1.1643, highlighting a tight balance. Price action is compressing into a short-term ascending support line from August lows, suggesting a breakout may be near.

The RSI at 49 indicates neutral sentiment, while the MACD remains slightly negative, reflecting limited upside momentum. Key resistance sits at $1.1656, and a close above this level could drive gains toward $1.1723.

On the downside, immediate support lies at $1.1581, with a break below exposing further weakness toward $1.1459. For now, EUR/USD remains range-bound, but tightening conditions suggest a directional move is building as traders await U.S. and Eurozone economic data.