US Dollar Forecast: Falls as Traders Eye July Fed Cut – GBP/USD and EUR/USD

Market Overview

The US Dollar Index (DXY) slipped to 99.40 despite hawkish remarks from Fed Chair Jerome Powell and firm labor data. Powell warned that persistent inflation amid economic slowdown could trigger stagflation, briefly supporting the dollar.

However, markets remain focused on easing price pressures and rising expectations for rate cuts. March CPI slowed to 2.4% year-over-year, while core CPI dropped to 2.8%, both below forecasts. Meanwhile, initial jobless claims fell to 215,000, but continuing claims rose to 1.885 million, hinting at labor market strain.

According to the CME FedWatch tool, traders expect 86 bps of Fed cuts by end-2025, with July flagged for the first move—putting downward pressure on the dollar despite Powell’s more cautious stance.

US Dollar Index (DXY) – Technical Analysis

The U.S. Dollar Index (DXY) is trading near $99.40, slipping further below its 50-period EMA ($99.86) and struggling to reclaim the 23.6% Fibonacci level at $100.17. The dollar has failed to break above the descending trendline drawn from the April 9 high of $103.32, reinforcing a bearish outlook in the near term.

Price remains trapped in a tight consolidation band between $99.20 and $100.18. The failure to retake the 38.2% Fib level at $100.77 keeps bears in control. If $99.20 breaks, the next support levels are seen at $98.71 and $98.23.

Short-term momentum remains weak, with the 50 EMA continuing to slope downward. A break above $100.17 would be the first sign of reversal—but until then, dollar bulls remain on the defensive.

GBP/USD Technical Analysis

The British pound (GBP/USD) continues to firm, trading around $1.3277 as it respects a rising trendline from April’s lows. The 50 EMA, currently at $1.3204, offers near-term support, aligning with the ascending structure.

Price action remains constructive, with bulls aiming to breach immediate resistance at $1.3334. A close above this level could expose the $1.3387 and $1.3448 targets.

On the downside, support sits at $1.3252 and deeper at $1.3206. Momentum remains favorable while price stays above the 50 EMA, but a close below the trendline may shift sentiment.

For now, the technical picture favors another leg higher, especially if GBP/USD clears $1.3334 on strong volume and continued dollar softness.

EUR/USD Technical Forecast

The EURUSD is consolidating near $1.1372, holding above its 50 EMA ($1.1333) and ascending trendline support. The pair continues to respect the 23.6% Fibonacci retracement level at $1.1342, maintaining a bullish undertone. A sustained move above $1.1417 could open the door toward $1.1475 and $1.1548, with upside momentum intact.

On the downside, watch $1.1342 closely. A break below may trigger a slide toward the 38.2% Fib level at $1.1260 and 50% at $1.1194. The overall structure remains supportive as long as the trendline holds.