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

Market Overview

The US Dollar Index (DXY) remains steady as markets anticipate Fed Chair Jerome Powell’s testimony at 3:00 PM on Feb. 11 and key inflation data on Feb. 12. The NFIB Small Business Index, scheduled for 11:00 AM, is forecasted at 104.6, slightly below the previous 105.1, reflecting potential business sentiment shifts.

Powell’s testimony will be closely analyzed for monetary policy signals, with traders looking for any hints on future rate adjustments. Additionally, FOMC Members Hammack, Bowman, and Williams are set to speak, possibly adding further insights on the Fed’s stance.

The February 12 Consumer Price Index (CPI) report at 1:30 PM is expected to show 0.3% m/m inflation, with the yearly rate at 2.9% y/y. A higher reading could strengthen the dollar as expectations of prolonged high interest rates grow, while a weaker print could revive rate-cut bets, potentially weighing on DXY.

Additional market-moving events include the 10-year bond auction, a $79.8 billion budget deficit. With DXY near resistance, CPI data and Powell’s remarks will be pivotal in determining the dollar’s next move.

US Dollar Index (DXY) – Technical Analysis

The Dollar Index (DXY) is trading at $108.356, edging up 0.01% as traders assess the Federal Reserve’s next move. The pivot point at $108.291 is acting as a crucial level—holding above it keeps bullish momentum intact, while a break below could trigger fresh selling pressure.

The 50-day EMA at $108.129 and 200-day EMA at $108.073 reinforce a near-term bullish outlook, with immediate resistance at $108.589. A breakout above this level could push DXY toward $108.896, signaling further upside. On the flip side, if the index dips below $107.907, expect further losses toward $107.306.

With markets eyeing upcoming economic data, traders should watch for a decisive move above $108.589 to confirm continued strength or a break below $108.291 for a potential shift in sentiment.

GBP/USD Technical Analysis

GBP/USD is hovering at $1.23598, slipping 0.01% as traders remain cautious amid a consolidating market. The pair is struggling below the pivot point at $1.24203, with both the 50-day EMA at $1.24107 and 200-day EMA at $1.24340 acting as dynamic resistance. A failure to break above these levels could keep sellers in control.

On the downside, immediate support stands at $1.22725, and a break below this level could accelerate losses toward $1.21577. A symmetrical triangle pattern is forming, indicating a potential breakout soon. If GBP/USD clears $1.24203, bullish momentum could push it toward $1.25268. However, as long as the pair remains below the pivot, bearish pressure dominates.

EUR/USD Technical Forecast

EUR/USD is trading at $1.03049, barely moving in the last session as it remains pinned below key resistance levels. The pivot point at $1.03353 is acting as a strong cap, with the pair needing a decisive break above this level to shift bullish.

However, the 50-day EMA at $1.03538 and the 200-day EMA at $1.03893 reinforce downside pressure, making upward moves challenging.

Immediate support sits at $1.02412, and if breached, could expose $1.01779, intensifying selling pressure. Meanwhile, resistance at $1.03983 must be cleared to signal a trend reversal. The downward trendline remains intact, keeping EUR/USD in bearish territory unless a breakout above $1.03353 sparks fresh demand.