US Dollar Forecast: Fed Minutes Set to Drive Volatility – GBP/USD and EUR/USD Outlook

Market Overview

The US Dollar Index (DXY) is trading at 106.90, as traders anticipate the FOMC meeting minutes for insights into the Federal Reserve’s interest rate policy. Investors remain cautious as the market prices in a 40% chance of a rate cut by September, while strong inflation data suggests the Fed may delay easing.

Upcoming data releases include Building Permits, forecast at 1.46M, slightly below the previous 1.48M, and Housing Starts, expected at 1.39M versus a prior 1.50M. These figures will provide clues on the strength of the housing market, a key economic indicator.

Markets are also digesting January’s 0.9% drop in retail sales, the sharpest decline in nearly two years. Despite a resilient labor market, weakening consumer demand could influence the Fed’s rate trajectory. Traders will closely watch the Fed minutes for signals on inflation risks and future rate moves.

US Dollar Index (DXY) – Technical Analysis

The Dollar Index (DXY) is trading at $106.904, up 0.01%, but remains under pressure below the key pivot level at $107.027. A sustained move above this threshold could shift momentum in favor of buyers, targeting immediate resistance at $107.320, with further upside toward $107.789. However, failure to reclaim $107.027 may reinforce bearish sentiment.

On the downside, support at $106.560 remains a critical level to watch, with a deeper pullback potentially testing $106.194. The 50-day EMA at $107.340 and 200-day EMA at $107.812 suggest significant resistance ahead, making further gains challenging unless a breakout occurs.

GBP/USD Technical Analysis

GBP/USD is trading at $1.26212, down 0.02%, as the pair hovers near a key inflection point. The pivot level at $1.25823 is acting as crucial support—holding above this zone keeps the near-term outlook bullish, while a drop below could shift sentiment in favor of sellers.

Immediate resistance stands at $1.26840, with a break above this level paving the way toward $1.27982. On the downside, initial support is seen at $1.24898, with deeper declines potentially testing $1.23751. The 50-day EMA at $1.25307 is lending short-term support, while the 200-day EMA at $1.24687 signals broader stability.

For now, GBP/USD remains in a consolidation phase, with a breakout above $1.26840 needed to confirm bullish momentum.

EUR/USD Technical Forecast

EUR/USD is trading at $1.04593, down 0.01%, as the pair remains in a tight range while traders assess the next move. The pivot point at $1.04435 serves as a crucial threshold—holding above this level keeps the short-term outlook bullish, while a drop below it could invite fresh selling pressure.

Immediate resistance stands at $1.05091, with a break above this level opening the door to $1.05700. On the downside, support is seen at $1.03719, with a deeper cushion at $1.03176. The 50-day EMA at $1.04257 offers dynamic support, while the 200-day EMA at $1.04043 strengthens the broader trend.

EUR/USD is at a critical juncture—staying above $1.04435 could spark upside momentum, but a break below might shift sentiment toward sellers.