U.S. Dollar Drifts Lower Amid Cooling PPI, CPI Data – Analysis for EUR/USD, GBP/USD

Market Overview

The U.S. Dollar Index (DXY) dipped toward 100.60 during early U.S. trading, reflecting a cautious market tone as traders digested mixed economic data. The dollar’s recent pullback is largely attributed to signs of easing inflation, which have tempered expectations of further rate hikes by the Federal Reserve.

Inflation Data Softens Fed Tightening Expectations

April’s Producer Price Index (PPI) rose 2.4% year-over-year, down from 2.7% and below the forecasted 2.5%. Core PPI also slowed to 3.1%, down from 4%. Monthly figures declined by 0.5% and 0.4%, respectively.

Meanwhile, the Consumer Price Index (CPI) edged up 2.3% annually, slightly below expectations, with core CPI holding steady at 2.8%.

Labor Market Stability Supports Dollar Floor

Initial Jobless Claims held at 229,000 last week, while continuing claims rose modestly to 1.881 million—signaling labor market resilience despite slowing inflation. President Trump’s optimistic remarks on U.S.-China trade discussions added a slight boost to sentiment, helping limit downside pressure on the dollar.

US Dollar Index (DXY) – Technical Analysis

The U.S. Dollar Index (DXY) continues to edge lower, hovering near $100.57 after repeated failures to break above $101.15. Price remains capped by a descending trendline and the 50-period EMA at $100.80, both reinforcing short-term bearish pressure. If the index breaks below $100.40, further downside could target $100.26 and $99.84.

However, a rising trendline from late April still offers potential support around the $100.00–99.84 zone. A clean drop below this base would likely shift sentiment toward $99.48.

For bulls to regain control, DXY must reclaim $100.80 and close above $101.15 to attempt a move back toward $101.54 and $101.98. Until then, price action favors sellers with limited signs of a rebound.

GBP/USD Technical Analysis

GBP/USD is trading near $1.3324, steadily climbing above its ascending trendline and holding firm above the 50-period EMA at $1.3287. The pair has formed a consistent series of higher lows since bottoming out near $1.3161 on May 13, indicating bullish momentum.

A break above immediate resistance at $1.3360 could open the door toward the next levels at $1.3403 and $1.3444. Candlestick structure shows continued buying interest, with little rejection from sellers at key levels.

If the price slips below the trendline and the $1.3305 support, downside targets include $1.3221. For now, technical structure favors continued gains, as long as price action remains above the EMA and the ascending support line holds.

EUR/USD Technical Forecast

EUR/USD is trading near $1.1212, holding above a short-term ascending trendline that has defined higher lows since the May 13 reversal. The pair recently reclaimed the 50-period EMA at $1.1197, now acting as support, suggesting buyers may still have control.

A clean break above the recent swing high at $1.1266 would confirm bullish continuation toward the next resistance at $1.1334. However, failure to hold above the $1.1195 support or the trendline could trigger a retest of $1.1135.

Candlestick structure appears constructive, with small-bodied candles consolidating near resistance—often a precursor to breakout moves. For now, short-term bias remains bullish, provided the uptrend line remains intact and the dollar continues to weaken.