US Dollar Forecast: Struggles to Break Out as ISM PMI Signals Contraction – GBP/USD and EUR/USD

Market Overview

The US Dollar Index (DXY) hovered near $104.19 during the early European session, showing limited movement as traders assessed mixed signals from the latest economic data. The March ISM Manufacturing PMI dropped to 49.0 from 50.3, signaling contraction and falling short of forecasts. The report also showed the Employment Index slipping to 44.7—its weakest since July—while the Prices Paid Index surged to 69.4, indicating rising input costs.

Job market data added to the pressure. The JOLTS report showed job openings dropped to 7.56 million in February, down from 7.76 million the previous month. While overall hiring and separation levels remained steady, the decline in openings signals softening labor demand and cooling economic momentum.

Fed commentary offered little clarity. Richmond Fed President Tom Barkin said the data remains inconclusive, making it difficult to gauge where the economy is heading. Market pricing via CME FedWatch shows low expectations for a rate cut in May, but expectations could shift if upcoming reports show continued weakness.

US Dollar Index (DXY) – Technical Analysis

The U.S. Dollar Index (DXY) is hovering around $104.19, caught in a tight consolidation range between the 50 EMA ($104.18) and the 200 EMA ($104.30). It’s been testing both moving averages without conviction, reflecting a market that’s hesitant ahead of key macro risk events.

Price action is pressing against a modest ascending trendline from the March lows, showing buyers are defending ground near $104.00. Immediate resistance stands at $104.40, with the next upside barrier at $104.67. On the downside, a break below $104.00 could trigger a slide toward $103.79 and $103.50.

Momentum remains flat, and the dollar’s next move likely hinges on incoming economic data and geopolitical clarity. Dollar bulls are waiting for a breakout; until then, range-bound volatility dominates.

GBP/USD Technical Analysis

The British Pound remains under pressure, hovering near $1.2925, testing key support levels. The 50 EMA at $1.2926 and the 200 EMA at $1.2906 have been pivotal in holding price action, but the market faces a challenge with the broader downtrend.

A break below the immediate support near $1.2900 could trigger further selling, targeting the next support at $1.2873 and $1.2838. However, should GBP/USD manage to break above the descending trendline resistance at $1.2967, a retest of the $1.3014 resistance is possible.

The RSI remains neutral at 46.24, indicating indecision as the pair consolidates. GBP/USD is caught between support and resistance, with key levels at $1.2900 and $1.2967.

EUR/USD Technical Forecast

The euro is attempting to stabilize above the $1.0792 pivot after several failed downside tests. Price is now hovering just above the 200 EMA at $1.0793, with the 50 EMA also in focus around $1.0804.

This confluence suggests consolidation, but the key lies in the descending trendline from the March highs—still intact and capping bullish attempts.

A break above $1.0826 would open the door to a push toward $1.0861. On the downside, a drop below $1.0763 could expose further weakness to $1.0732.

The RSI at 47.96 remains neutral but is starting to tilt higher. EUR/USD needs a clean break above $1.0826 to shift bias bullish; otherwise, consolidation continues near the $1.0790 zone.