US Dollar Forecast: Falls Amid 70% Fed Cut Odds and Trade Tensions – GBP/USD and EUR/USD

Market Overview

The U.S. dollar edged lower on Wednesday, as mounting trade policy concerns overshadowed a stronger-than-expected labor market report. The March ADP employment figures showed an increase of 155,000 private-sector jobs, well above the forecasted 105,000. But rather than offering relief to dollar bulls, the data failed to shift market sentiment as attention remains focused on a pending tariff announcement from the White House.

Market participants are increasingly cautious, anticipating a new round of U.S. tariffs expected to impact key trading partners. President Trump’s proposed 10% baseline tariff on all imports has already drawn criticism from global counterparts and triggered warnings of reciprocal measures. Investors worry that a prolonged trade dispute could weigh on global growth and push the U.S. economy closer to contraction.

The dollar’s weakness is further exacerbated by expectations of a policy shift at the Federal Reserve. Fed funds futures now imply a 70% probability of a rate cut by June, according to CME FedWatch data. U.S. Treasury yields have drifted lower, with the 10-year note holding near 4.15%, reinforcing the market’s view that the central bank may be preparing to counter economic headwinds.

Looking ahead, investors are closely watching upcoming U.S. data, including Weekly Jobless Claims and the ISM Services PMI, which could offer further clues about the near-term trajectory of the economy. However, the most consequential figure may be Friday’s Nonfarm Payrolls (NFP) report, which will either validate or challenge the current bearish bias toward the dollar.

Until then, trade policy developments and Fed rate cut expectations will likely remain the dominant drivers for the U.S. dollar.

US Dollar Index (DXY) – Technical Analysis

The U.S. Dollar Index (DXY) has broken sharply lower, falling beneath its key pivot at $103.21 and trading near $102.51. The drop follows a rejection from the $104.33 resistance zone, which aligns with the 23.6% Fibonacci retracement of the February-March decline.

Immediate resistance sits at $103.21, with stronger resistance near $104.12. On the downside, the index is testing the 1.618 Fib extension at $102.32. If this level gives way, next supports are seen at $101.76 and $101.36.

Technically, DXY remains under pressure, with the 50 EMA at $103.84 and the 200 EMA at $104.83, both well above current price.

The bearish crossover and expanding downside momentum suggest limited relief in the short term. DXY is in breakdown mode below key support. A sustained close under $102.32 may accelerate losses toward $101.36. Bulls need a reclaim of $103.21 to stabilize.

GBP/USD Technical Analysis

Sterling has broken decisively higher, with GBP/USD trading at $1.3139 after piercing multiple resistance levels, including the 50% Fibonacci retracement at $1.3094 and the 61.8% level at $1.3148.

The pair is supported by strong bullish momentum, having rallied above the 50 EMA at $1.2950 and well clear of the 200 EMA at $1.2832. The breakout also confirms a shift from weeks of consolidation between $1.2865 and $1.2974.

Immediate resistance now lies at $1.3226, aligned with the 78.6% Fib level. If momentum persists, bulls could aim for the 100% extension at $1.3324. On the downside, key support lies at $1.3041, with stronger protection at $1.2974 if price retraces.

GBP/USD has broken out of consolidation with strength. Holding above $1.3094 keeps bulls in control, with upside targets toward $1.3226 and beyond.

EUR/USD Technical Forecast