US Dollar Forecast: Powell Signals Dovish Path Ahead – GBP/USD and EUR/USD

Market Overview

The U.S. dollar extended its recovery for a third straight session on Friday, with the U.S. Dollar Index (DXY) climbing to to $104.01. This move reflects persistent caution among investors navigating escalating trade friction and dovish policy signals from the Federal Reserve.

Fed Policy Outlook and Trade Measures Shape Market Tone

Market sentiment remains mixed after the Federal Reserve reaffirmed its plan for two 25-basis-point rate cuts before the end of 2025. Chair Jerome Powell noted that recent trade measures—especially new reciprocal tariffs set to begin April 2—could slow economic growth. These include additional duties on steel and aluminum, adding to the 25% tariffs introduced in February.

Labor market data showed U.S. initial jobless claims rising to 223,000 in the week ending March 15, slightly above the prior week’s revised figure of 221,000. Meanwhile, the Philadelphia Fed Manufacturing Index fell to 12.5 in March, from 18.1 in February, though the result still beat consensus estimates of 8.5.

Geopolitical Risk Supports Dollar as Safe-Haven

Beyond trade policy, global security developments contributed to sustained demand for the dollar. Intensified drone strikes between Russia and Ukraine and renewed military activity in the Middle East have added to market uncertainty, reinforcing the dollar’s role as a preferred reserve currency.

Despite growing expectations for monetary easing, the dollar remains supported by elevated geopolitical risks and measured economic data. This combination is likely to limit downside pressure on the greenback in the near term, even as rate cut probabilities increase heading into the June FOMC meeting.

US Dollar Index (DXY) – Technical Analysis

The Dollar Index (DXY) is hovering around $104.01, just above its pivot point at $103.75. While the index is marginally lower on the day, it remains within a stable range, suggesting traders are in wait-and-see mode. The 50-day and 200-day EMAs at $105.83 and $105.45, respectively, sit well above current levels, indicating lingering downward pressure.

A move above $104.26 would open the path toward $104.90, but momentum is lacking. On the downside, a break below $103.75 could trigger sharper losses, with support at $103.21 and $102.83 in focus.

For now, the dollar is holding steady, but any break from this range could set the tone for the next leg—especially as markets digest mixed signals on rate policy.

GBP/USD Technical Analysis

GBP/USD is holding just below the pivot at $1.29446, trading near $1.29345 as traders weigh near-term direction. The pair is caught between support at $1.29102 and resistance at $1.29790, with the 50-day EMA at $1.29659 acting as overhead pressure.

Buyers have yet to show real conviction, and the price slipping below the pivot reflects some hesitance. That said, the 200-day EMA at $1.28698 provides a solid floor for now. A break above $1.29446 could signal fresh bullish momentum, opening the door to $1.30118.

But if the pair dips below $1.29102, a deeper move toward $1.28683 looks likely. For now, it’s a waiting game—watch how price reacts around the $1.29446 mark before calling the next move.

EUR/USD Technical Forecast

EUR/USD is trading near $1.0834, showing modest gains but still sitting just below the key pivot at $1.08594. The 50-day EMA at $1.08775 is acting as dynamic resistance, capping upward momentum for now.

Price action remains mixed, with the pair caught between the 200-day EMA support at $1.07771 and resistance near $1.09171. A decisive break above $1.08594 could invite more buyers, but until that happens, the bias leans slightly bearish. If $1.08049 gives way, we could see a test of the $1.07643 level.

Right now, traders seem hesitant, likely waiting for a clearer catalyst. It’s a tight range, and momentum could shift quickly—watch how the pair behaves around that pivot.