US Dollar Price Forecast: Falls as Fed Rate Cut Bets Intensify – GBP/USD and EUR/USD Outlook

Market Overview

The U.S. Dollar Index (DXY) continues to decline as markets increasingly position for Federal Reserve rate cuts later this year. Recent economic data has pointed to signs of labor market softness, reinforcing expectations of monetary easing.

The latest Non-Farm Payrolls report showed that the U.S. economy added 151K jobs in February, missing the forecast of 159K and reflecting a slowdown from January’s downwardly revised 125K. Meanwhile, the unemployment rate edged up to 4.1%, the highest level in nearly two years, fueling concerns over labor market resilience.

Federal Reserve Chair Jerome Powell reiterated that policymakers are in “no hurry” to adjust interest rates, emphasizing the need for greater clarity on economic conditions. However, his measured stance contrasts with growing market sentiment that the Fed may need to act sooner than expected. As a result, the dollar remains under pressure, weighed down by speculation of impending rate cuts.

Key Economic Events Ahead

Traders will closely monitor this week’s inflation data, which could determine the dollar’s near-term direction. The Consumer Price Index (CPI) report, set for release on March 12, is expected to show a slight moderation in price pressures.

Core CPI (m/m) is projected at 0.3%, easing from 0.4% previously, while headline CPI (m/m) is forecast to slow to 0.3% from 0.5%. On an annual basis, inflation is expected to dip to 2.9% from 3.0%. A softer-than-expected print could reinforce rate-cut expectations and weigh further on the dollar.

On March 13, attention will shift to the Producer Price Index (PPI) and weekly jobless claims. The Core PPI (m/m) is anticipated to remain steady at 0.3%, while initial jobless claims are forecast to rise slightly to 226K from 221K. Any downside surprises could add to dollar weakness.

Rounding out the week, the University of Michigan’s Consumer Sentiment Index will be released on March 14. Expectations point to a decline to 63.8 from 64.7, offering insights into consumer confidence and inflation expectations—key considerations for Fed policymakers.

If inflation data undershoots expectations, speculation on Fed rate cuts could intensify, keeping the dollar under pressure. Conversely, a stronger CPI reading might offer the greenback some relief by suggesting that the Fed could delay policy adjustments.

US Dollar Index (DXY) – Technical Analysis

The Dollar Index (DXY) is trading at $103.85, up 0.02%, but remains under pressure below its pivot point at $104.41. A downward channel continues to define market sentiment, keeping selling pressure intact.

Immediate resistance is seen at $105.18, with a breakout above this level potentially shifting momentum toward $106.00. However, the 50-day EMA at $105.06 and 200-day EMA at $106.38 suggest a broader bearish trend.

On the downside, $103.43 serves as key support, with further declines possibly extending to $102.64.

GBP/USD Technical Analysis

The British pound (GBP/USD) remains in an upward trajectory, currently trading at $1.2912. The pair has been respecting an ascending channel, signaling continued bullish sentiment. Immediate resistance is seen at $1.2944, with a break above potentially targeting $1.3013.

The 50-day EMA at $1.2851 is offering strong near-term support, while the 200-day EMA at $1.2693 provides long-term stability. If GBP/USD fails to hold above the $1.2868 pivot zone, a pullback to $1.2803 could be on the horizon.

Given the current momentum, the bias remains bullish as long as the price stays above the 50-day EMA. However, traders should watch for potential profit-taking near resistance levels.

EUR/USD Technical Forecast

The EUR/USD continues to push higher within a well-defined ascending channel, currently trading at $1.0836. The pair has encountered strong resistance near $1.0871, a key level that must be cleared for further upside toward $1.0949.

On the downside, immediate support is found at $1.0779, with a deeper pullback potentially targeting the 50-day EMA at $1.0744. The 200-day EMA at $1.0562 remains a critical long-term support level.

The trend remains bullish as long as EUR/USD stays above $1.0805. A breakout above $1.0871 could fuel further gains, while a break below $1.0779 might signal short-term weakness.