US Dollar Forecast: Will DXY Hold $106 Support or Slide Further? – GBP/USD and EUR/USD Outlook

Market Overview

The US Dollar Index (DXY) is tumbling on Monday as market sentiment shifts away from safe-haven assets. Optimism surrounding a potential Ukraine peace deal has led investors to trim dollar exposure, sending the DXY lower from last week’s highs. European leaders signaling their support for Ukraine security guarantees has boosted risk appetite, further pressuring the greenback.

On the economic front, US data presented mixed signals. The ISM Manufacturing PMI came in at 50.3, slightly below expectations of 50.6, while the S&P Global Manufacturing PMI surprised to the upside at 52.7. Additionally, the ISM Prices Paid Index jumped to 62.4, reflecting growing inflationary pressures.

Despite these figures, US Treasury yields continued to drift lower, extending last week’s downtrend. Wall Street remains mixed, with major indices posting modest gains and losses.

The CME FedWatch Tool now indicates a rising probability of a Fed rate cut in June, though expectations remain divided. Investors will closely watch upcoming speeches from FOMC officials, which could provide further direction for the dollar.

US Dollar Index (DXY) – Technical Analysis

The Dollar Index (DXY) is trading at $106.518, staying just below its pivot point of $107.040. The short-term outlook remains bearish as long as the index trades below this level, with the 50-day EMA at $106.883 and the 200-day EMA at $107.370 acting as additional resistance zones.

If DXY fails to reclaim $107.040, immediate support lies at $106.159, with further downside risk extending to $105.617. On the upside, a break above $107.040 could shift momentum toward $107.638, with a stronger move eyeing $108.507.

Traders should watch for a decisive push above $107.040 for renewed bullish momentum, while continued weakness below this level may signal further selling pressure.

GBP/USD Technical Analysis

GBP/USD is trading at $1.27012, extending its upward momentum while holding above the key pivot level at $1.26325. The 50-day EMA at $1.26315 is reinforcing near-term support, while the 200-day EMA at $1.25402 indicates a broader bullish structure.

As long as the pair stays above $1.26325, the trend favors buyers, with immediate resistance at $1.27228 and a stronger barrier at $1.28034. However, a break below $1.26325 could shift sentiment, opening the door for a decline toward $1.25568, with further downside risk at $1.24782.

Traders should watch price action near $1.27228—a breakout could signal a move toward new highs, while failure to hold above the pivot may trigger heavier selling pressure.

EUR/USD Technical Forecast

The EUR/USD pair is trading at $1.04893, holding above its pivot point of $1.04542, signaling short-term bullish momentum. The 50-day EMA at $1.04513 is acting as immediate support, while the 200-day EMA at $1.04266 provides a broader safety net for buyers.

If the pair remains above $1.04542, upside targets include $1.05316, followed by $1.05935, where stronger resistance may emerge.

A break below $1.04542, however, could shift sentiment, exposing the pair to $1.04021, with a deeper slide toward $1.03603 if selling pressure intensifies. Traders should monitor momentum around $1.05316 for signs of further gains.