US Dollar Price Forecast: Weakens on Prolonged U.S. Shutdown – GBP/USD and EUR/USD

Market Overview

During the Asian trading session, the US Dollar Index (DXY) fell to around 98.40, reversing earlier gains. The Greenback continues to lose ground as the US government shutdown stretches into its 19th day, with no resolution in sight.

Prolonged Shutdown Weighs on Market Confidence

The extended shutdown is creating uncertainty for businesses and consumers as key government operations remain closed. This lack of clarity is discouraging investors from holding dollars, dampening sentiment even as the broader US economy remains resilient, supported by job growth and steady business activity. Still, the political deadlock is preventing the dollar from gaining traction amid concerns over its economic impact.

Fed Rate Cut Expectations Pressure the Dollar

Markets are now pricing in a near 100% chance of a Fed rate cut in October and a 96% probability of another in December, according to the CME FedWatch Tool. St. Louis Fed President Alberto Musalem signaled support for further easing if job risks increase and inflation stays subdued, reinforcing expectations of a more accommodative stance.

Easing US-China Trade Tensions Offer Limited Relief

Hopes of progress in US-China trade talks are helping to contain losses. President Donald Trump expressed optimism about renewed Chinese purchases of soybeans, while Treasury Secretary Scott Bessent and Vice Premier He Lifeng prepare for talks aimed at reducing trade friction.

US Dollar Index (DXY) – Technical Analysis

The U.S. Dollar Index (DXY) is trading near 98.40, showing mild recovery after rebounding from 98.00 support. The index remains capped below both the 50-day EMA at 98.59 and the 200-day EMA at 98.46, indicating limited bullish strength.

A break above 98.68 could open room toward 99.08, while failure to sustain above the moving averages may trigger another pullback toward 98.20 or 98.00. RSI near 52 signals neutral momentum, suggesting the market is in a consolidation phase after recent volatility.

GBP/USD Technical Analysis

The GBP/USD pair is trading around $1.3414, holding near both the 50-day EMA at $1.3403 and the 200-day EMA at $1.3411, signaling indecision in the market. A sustained move above $1.3450 could trigger a retest of $1.3516, while a drop below $1.3387 may lead to further losses toward $1.3307.

The RSI near 48 suggests neutral momentum after a recent pullback, indicating that traders are waiting for clearer direction.

EUR/USD Technical Forecast

The EUR/USD pair is trading near $1.1658, struggling to hold above the 50- and 200-period EMAs, which are converging around current levels. A sustained break above $1.1672 could encourage buyers to retest $1.1720, while a drop below $1.1609 may expose the next support near $1.1545.

The RSI is hovering near 46, suggesting neutral momentum after a recent pullback from overbought territory. Price action remains confined within a short-term ascending trendline, keeping mild bullish potential intact for now.