US Dollar Forecast: Fed Signals and Tariff Risks Undermine DXY – GBP/USD and EUR/USD

Market Overview

The U.S. Dollar (USD) is under renewed pressure, slipping to 102.52 at the start of the week, despite stronger-than-expected March Nonfarm Payrolls (NFP) data. Markets remain focused on recession risks and the increasing likelihood of Federal Reserve rate cuts, which continue to weigh on the greenback’s outlook. Traders are now pricing in four 25-basis-point rate cuts in 2025.

Stronger Jobs Data Fails to Lift Dollar

March’s NFP report showed the U.S. economy added 228,000 jobs, well above February’s revised 117,000. However, the robust labor data has done little to shift the market’s bearish stance on the dollar. Investor sentiment remains cautious, as concerns over a potential economic slowdown persist.

Fed Chair Jerome Powell noted that inflation is approaching the central bank’s target but remains somewhat elevated. He also warned of potential price pressures linked to existing trade tariffs, emphasizing the Fed’s mandate to prevent temporary inflation spikes from becoming entrenched.

Yield Curve and Labor Signals Add to Bearish Outlook

Market participants expect the Fed to begin cutting rates as early as June, with four rate reductions projected through 2025. The 10-year U.S. Treasury yield remains below 4.0%, reflecting growing risk aversion and declining demand for dollar-denominated assets.

In addition, the unemployment rate edged up to 4.2% from 4.1%, raising questions about the resilience of the labor market. While job creation remains steady, the uptick in unemployment suggests underlying weakness that could reinforce the case for policy easing.

Overall, the combination of rising rate-cut expectations, softening labor indicators, and cautious investor sentiment continues to undermine support for the U.S. Dollar in the near term.

US Dollar Index (DXY) – Technical Analysis

The U.S. Dollar Index is under pressure at $102.52 after failing to reclaim the $102.80–$103.15 resistance band. Price action continues to struggle below both the 50 EMA ($103.33) and 200 EMA ($104.54), reinforcing a short-term bearish bias.

The recent rebound off $101.27 found a ceiling near the 50% Fibonacci retracement of the recent drop, but the inability to build on that strength signals exhaustion. The pivot area sits near $102.43, and with the price drifting lower from it, momentum appears to favor the downside.

If $102.43 fails to hold, eyes shift to $101.98 and $101.27 as the next likely support levels. On the upside, a decisive close above $103.15 would be needed to flip the near-term structure back in favor of buyers.

GBP/USD Technical Analysis

The British pound is currently trading at $1.2896, attempting to stabilize after a sharp rejection from the $1.3206 high earlier this week. The sell-off broke below the 50 EMA ($1.2966) and found tentative support around the 200 EMA at $1.2851, which also aligns closely with an ascending trendline from the February low. This confluence of technical support could keep downside limited in the short term.

The immediate pivot to watch is $1.2931. A move above this level could expose resistance at $1.3012, followed by the critical $1.3115 mark. On the flip side, a breakdown below $1.2850 would shift focus toward $1.2821 and potentially $1.2755. The 50 EMA remains above the 200 EMA, maintaining a medium-term bullish bias—though momentum has weakened notably.

RSI sits at 38.7, hovering just above oversold territory, indicating possible stabilization or a modest rebound in the near term. GBP/USD is clinging to key trend and EMA support. A break below $1.2850 could deepen losses, while a reclaim of $1.2930 might offer short-term relief for bulls.

EUR/USD Technical Forecast

The EUR/USD pair is trading around $1.1001 after rebounding from the $1.0960 region, a key Fibonacci support aligned with the 38.2% retracement of the recent rally. Price reclaimed the 50 EMA ($1.0898), which now serves as a dynamic support.

The broader structure shows a breakout from a multi-week descending trendline, followed by a healthy retest—suggesting buyers are still in control.
Immediate resistance is seen at $1.1050, followed by $1.1100 and the 78.6% Fib level at $1.1201.

If bulls maintain control above $1.0960, this leg could extend higher, potentially targeting a full retrace of the recent downswing. On the downside, a break back below $1.0950 could expose $1.0880 and the 200 EMA ($1.0758). RSI remains supportive near 55, leaving room for upside.

The bullish breakout is holding above key moving averages and trendlines. As long as $1.0960 holds, upside continuation remains viable.