US Dollar Forecast: Eyes on ECB Rate Decision, EUR/USD and GBP/USD Outlook

US Dollar Index Holds Firm as Inflation Eases, PPI Data in Focus

The US Dollar Index (DXY) remains steady at 101.76 after softer-than-expected inflation data, with Core CPI rising 0.3% and CPI y/y easing to 2.5%. These figures reduced expectations of aggressive rate cuts by the Federal Reserve.

Investors now shift their attention to the upcoming Core PPI and Unemployment Claims reports.

Both are expected to provide further clues on inflationary pressures and the strength of the labor market. If PPI data comes in lower than expected, the dollar may face selling pressure, while stable unemployment claims could provide some support.

US Dollar Index (DXY) – Technical Analysis 

The Dollar Index (DXY) is currently trading at $101.76, down slightly by 0.04%. The pivot point is set at $101.635, which is a crucial level for determining short-term momentum. Immediate resistance stands at $101.915, with additional barriers at $102.086 and $102.268.

On the downside, key support levels are found at $101.453, followed by $101.271 and $101.057. Both the 50-day and 200-day Exponential Moving Averages (EMA) hover around $101.548 and $101.634, reinforcing a cautious bullish outlook.

If the DXY holds above $101.635, the trend remains positive. However, a break below this support could trigger a sharper selling wave.

Sterling Weakens After Disappointing GDP and Trade Data

For the UK, GDP m/m remained stagnant at 0.0%, below the expected 0.2%. Additionally, the goods trade balance widened to £-20.0 billion, signaling slower economic activity. Industrial production fell by -0.8% versus an expected rise of 0.3%, further dampening sentiment around the sterling.

Construction output also contracted by -0.4%, missing expectations. These weak figures suggest that the UK economy may be facing headwinds, raising concerns about potential challenges for the Bank of England in its future monetary policies.

GBP/USD Technical Forecast

The GBP/USD pair is trading at $1.30448, up a modest 0.03%. The pivot point sits at $1.3049, serving as a critical level to watch. Immediate resistance is at $1.3104, with further levels at $1.3143 and $1.3189.

On the downside, key support is found at $1.3013, followed by $1.2975 and $1.2942. The 50-day and 200-day Exponential Moving Averages (EMA) both sit at $1.3085, indicating a critical resistance zone.

If the price remains above $1.3049, the trend holds a bullish bias, but a break below this level could trigger a sharp decline. Keep an eye on the $1.3049 level for short-term direction, as it will dictate near-term momentum.

Euro Slips as ECB Rate Decision Looms Amid Weak German Data

For Euro (EUR), the German WPI m/m dropped by -0.8%, significantly missing the forecast of 0.1%, signaling weakening inflationary pressures. Additionally, Italy’s unemployment rate fell slightly to 7.1%, offering some respite to the Eurozone outlook.

However, the key focus is now on the European Central Bank (ECB), which is expected to cut the Main Refinancing Rate to 3.65% vs. 4.25%. The ECB press conference later today will be crucial for setting the tone on future monetary policy, with traders closely watching for signs of further tightening or dovish shifts.

EUR/USD Technical Forecast

The EUR/USD pair is currently trading at $1.10156, showing a slight uptick of 0.04%. On the technical front, the pivot point stands at $1.10062, serving as the key level to watch. Immediate resistance is at $1.10498, with further levels at $1.10707 and $1.10867.

On the downside, support comes in at $1.09826, followed by $1.09628 and $1.09446. The 50-day Exponential Moving Average (EMA) sits at $1.10412, while the 200-day EMA at $1.10574 suggests the pair is flirting with bearish territory.

If the price stays above $1.10062, the outlook remains cautiously bullish, but a break below this pivot could signal sharp selling pressure ahead.