US Dollar Forecast: Struggles Ahead of CPI Release and Fed Decision – GBP/USD and EUR/USD

Market Overview

The U.S. Dollar Index (DXY) continues to trend lower, currently hovering around 102.60, as traders brace for today’s critical U.S. inflation print. Scheduled for release at 12:30 p.m. GMT, the Consumer Price Index (CPI) is expected to provide key insights into the Federal Reserve’s policy trajectory.

Forecasts suggest core CPI month-over-month will rise 0.3%, up from 0.2% in the prior month, while headline CPI is expected at 0.1%, slightly below the previous 0.2% figure.

On a year-over-year basis, CPI is projected to fall to 2.5% from 2.8%. Weekly unemployment claims are also expected to tick higher to 223,000, compared to 219,000 previously.

Tariff Pause Adds to Dollar Weakness

Adding to pressure on the greenback is President Trump’s recent announcement of a 90-day pause on new tariffs, reducing duties to 10% for most U.S. trade partners.

The move, intended to open the door for renewed trade negotiations, has momentarily eased global tensions. However, it has also raised concerns over U.S. economic resilience.

Mark Hackett, Chief of Investment Research at Nationwide, called the pause “a stabilizing gesture,” but warned that the underlying trade dispute remains unresolved.

Fed Balances Inflation and Slowing Growth

Meanwhile, the Federal Reserve faces mounting pressure as it balances persistent inflation with signs of slowing growth. According to minutes from the most recent FOMC meeting, policymakers acknowledged the “difficult tradeoffs” involved in pursuing stable prices while supporting economic momentum. Despite some softening in economic indicators, Fed officials have reiterated a data-dependent stance and downplayed the immediate impact of tariff dynamics.

Rate cut expectations have moderated in response. The CME FedWatch Tool now shows just a 40% probability of a cut at the Fed’s next meeting, a sharp decline from above 60% just weeks ago.

Still, a weaker-than-expected CPI report could revive dovish speculation and weigh further on the dollar, while a hotter reading may signal that the Fed’s inflation fight is far from over.

With uncertainty elevated and macro data in focus, today’s CPI release will likely set the tone for the U.S. dollar and interest rate outlook over the coming weeks.

US Dollar Index (DXY) – Technical Analysis

The U.S. Dollar Index is struggling to hold ground, sliding to $102.34 after failing to reclaim the $102.70 pivot. Price remains capped beneath the $103.33 resistance, with a stronger ceiling at $104.04.

On the downside, immediate support is seen at $101.83, followed by a firmer floor near $101.33. The 50 EMA at $103.04 continues to act as dynamic resistance, while the 200 EMA up at $104.25 keeps the broader trend tilted bearish.

Despite a short-lived rebound last week, sellers have regained control, and momentum favors a retest of lower support levels unless price closes decisively above $103.30. Unless DXY closes above $103.33, risk remains tilted to the downside toward $101.83. Eyes on CPI data for the next move.

GBP/USD Technical Analysis

GBP/USD is showing signs of recovery after rebounding from the 1.2713 support zone. The pair is now challenging both the 50 EMA at 1.2845 and the 200 EMA at 1.2893—critical levels that could shape the near-term trend.

A sustained close above 1.2893 could open the door to 1.2935 and potentially retest the 1.3016 resistance level. On the downside, immediate support sits at 1.2856, followed by 1.2713. Momentum is firming up, and the recent bullish structure remains intact as long as the pair holds above the rising trendline.

A break above the EMA confluence would likely signal fresh upside toward the psychological 1.3000 level. GBP/USD is holding above trendline support and may rally if it clears 1.2893. Momentum favors bulls, with a test of 1.3016 in sight.

EUR/USD Technical Forecast

EUR/USD is pushing higher, reclaiming the 1.0994 pivot zone and climbing toward short-term resistance at 1.1076. The pair is trading within a tightening symmetrical triangle pattern, with buyers showing renewed strength after bouncing from support at 1.0945.

Immediate resistance lies at 1.1076, followed by 1.1144. On the downside, support holds at 1.0945 and further down at 1.0890. The 50 EMA at 1.0974 is now acting as dynamic support, while the 200 EMA at 1.0887 underpins the broader bullish structure. RSI is trending higher, reflecting improving momentum.

A breakout above the triangle’s upper trendline could open the door for a rally toward 1.1189. EUR/USD is eyeing a breakout above 1.1076. A close above this level could fuel upside toward 1.1144–1.1189. Momentum favors the bulls.