US Dollar Forecast: Weighed by Dovish Fed Bets and Tariff Pause – GBP/USD and EUR/USD

Market Overview

The U.S. Dollar Index (DXY) continues to trade under pressure around 100.20, dragged lower by softer-than-expected U.S. economic data. March’s Consumer Price Index (CPI) fell 0.1% month-over-month, while annual inflation slowed to 2.4% from 2.8%, below the forecasted 2.6%. Core CPI rose just 0.1% on the month and 2.8% annually, also underperforming expectations.

The weaker inflation print has prompted traders to scale back rate hike bets, with the CME FedWatch Tool now pricing in three to four rate cuts by year-end.

FOMC minutes released earlier this week revealed growing concern among policymakers about balancing inflation and slowing growth—supporting the case for a more cautious Fed pivot.

Key Data Ahead: PPI and Sentiment to Guide USD

Labor market data added to uncertainty. Jobless claims rose to 223,000, while continuing claims fell to 1.85 million, suggesting the labor market is steady but softening.

Geopolitical risks remain elevated.

Although the U.S. paused new tariffs on most trading partners for 90 days, tensions with China continue after a 125% U.S. tariff was met with 84% Chinese retaliation. Slowing Chinese inflation (-0.1% CPI in March) has further clouded the global outlook.

Friday’s upcoming data will be key. At 12:30 p.m. GMT, March PPI is expected at 0.2%, with Core PPI at 0.3%. At 2:00 p.m. GMT, the University of Michigan’s Consumer Sentiment Index is forecast to fall to 54.0, while inflation expectations are seen at 5.0%. These figures will help shape the next leg for the U.S. dollar.

US Dollar Index (DXY) – Technical Analysis

The U.S. Dollar Index (DXY) continues to weaken, now trading around $99.82, down 0.55% on the day. After breaching the $100 psychological support, the index extended its decline toward $99.83, a key Fibonacci 1.618 extension level from the recent drop. The 50 EMA at $102.49 and 200 EMA at $104.03 both hover well above current price, confirming a bearish structure in play.

Immediate resistance is now seen at $100.30 and $101.24, while further downside could target $98.95 and $98.33. The RSI remains below 40, suggesting bearish momentum remains intact.

With inflation cooling and rate cut bets rising, sentiment around the dollar is shaky. Unless DXY reclaims $100.30, further losses toward $98 seem plausible.

GBP/USD Technical Analysis

GBP/USD is trading at $1.3068, extending its breakout above the psychological $1.3000 level. The pair has reclaimed the 50 EMA at $1.2905 and remains comfortably above the 200 EMA at $1.2851, signaling strong bullish momentum. Price action is now approaching resistance at $1.3113, with a breakout potentially opening the path toward $1.3207 and channel resistance at $1.3302.

On the downside, support is forming at the previous breakout zone of $1.2984. A failure to hold above this could see a retest of $1.2891.

With the broader trend still climbing within a rising channel, near-term sentiment remains positive. However, a pullback toward $1.2984 can’t be ruled out before bulls target new highs.

EUR/USD Technical Forecast

EUR/USD is on a tear, climbing to $1.1361 after breaking through key resistance at $1.1247. The move was backed by a decisive bounce off the 50 EMA at $1.1009, with bullish momentum accelerating as the U.S. Dollar Index slipped below the $100 mark. The breakout from the ascending channel signals a shift toward a more aggressive uptrend, with the next resistance at $1.1386, followed by $1.1457.

Support now lies at $1.1247, the previous breakout level. A retest of this zone could attract dip-buying interest. The RSI confirms strong momentum but is nearing overbought territory.

As long as EUR/USD holds above $1.1247, bulls remain in control. Watch for continuation toward the $1.15 region.