US Dollar Price Forecast: Weakens Ahead of Powell’s Fed Guidance, GBP/USD and EUR/USD

Market Overview

The US Dollar Index (DXY) hovered near 96.70 in early Asian trading, weighed down by expectations of Federal Reserve easing. Markets widely anticipate a 25-basis-point rate cut at the September meeting, with the CME FedWatch Tool assigning nearly a 100% probability to the move. A smaller group of traders is positioning for a larger reduction.

Investors are focused on Fed Chair Jerome Powell’s press conference following the policy decision.

His remarks, along with the updated Summary of Economic Projections and the “dot plot,” will provide guidance on the rate path. “The dollar is trading with a heavy tone as investors brace for a dovish message from the Fed,” said Karl Schamotta, Chief Market Strategist at Corpay.

Labor Market Data Reinforces Dovish Outlook

Weaker US employment indicators, including slower job growth and easing wage pressures, have added to the case for monetary easing. Market sentiment suggests the Fed will prioritize supporting growth, limiting near-term upside for the dollar.

Geopolitical Factors Add Uncertainty

In Europe, shifting dynamics in the Russia-Ukraine conflict have provided mixed support. Occasional safe-haven flows into the dollar may occur, but the dominant driver remains Fed policy expectations.

Traders will look to Wednesday’s decision and Powell’s comments for direction. Until then, DXY remains vulnerable to downside pressures.

US Dollar Index (DXY) – Technical Analysis

The U.S. Dollar Index (DXY) is showing signs of a short-term rebound after touching support near 96.56. On the 4-hour chart, price is attempting to recover but remains capped below the 0.236 Fibonacci retracement at 96.87. The next resistance levels to monitor are 97.06 and 97.21, aligned with the 0.382 and 0.5 retracement zones.

The RSI is near 31, signaling oversold conditions, though momentum is still weak. A sustained move above 97.21 could shift sentiment toward a broader recovery, while failure to hold above 96.56 risks retesting lower supports around 96.20 and 95.99. Overall, the index remains in a downtrend but may see corrective upside in the near term.

GBP/USD Technical Analysis

The GBP/USD pair is holding within an upward channel, trading near $1.3640 after testing resistance around $1.3677. The price action shows momentum supported by the 50-period EMA at $1.3565, while the 200-period EMA remains lower at $1.3502, reflecting a bullish structure.

The RSI is hovering at 66, close to overbought territory, suggesting that upside momentum is strong but stretched. If buyers sustain control above $1.3640, the next target sits near $1.3713.

On the downside, a break below $1.3592 could trigger a correction toward $1.3551. Overall, the pair is trending higher, but resistance overhead may prompt consolidation before further gains.

EUR/USD Technical Forecast

EUR/USD is trading around $1.1842, softening after testing resistance near $1.1878, which aligns with the 23.6% Fibonacci retracement of the recent swing. The pair earlier confirmed a breakout from a rising wedge, and that former resistance zone is now acting as support, reinforcing the broader bullish structure.

The RSI at 70 indicates overbought conditions, suggesting the potential for short-term consolidation. Immediate support is seen at $1.1811 and $1.1790, where the 50-EMA at $1.1749 also provides a dynamic floor.

Holding these levels keeps buyers in control, with upside targets at $1.1912 and $1.1946. A drop below $1.1740, however, could expose the pair to deeper retracements.