US Dollar Price Forecast: Fed Decision Nears; Bond Yield, GBP/USD and EUR/USD Outlook

US Dollar Firms as 10-Year Yields Steady Near 4.38%

The U.S. Dollar Index holds firm as the 10-year Treasury yield remains near 4.38%, reflecting investor caution ahead of the Fed’s decision. Strong retail sales data at 0.7% (above the forecast of 0.6%) highlighted robust consumer demand, boosting sentiment for higher U.S. yields.

Meanwhile, the Federal Funds Rate is expected to settle at 4.50%, down from 4.75%, with markets awaiting FOMC projections for 2025.

Upcoming data, including housing starts at 1.35M and building permits at 1.43M, could further impact the dollar. A hawkish Fed stance may push the 10-year yield toward 4.44%, strengthening the greenback.

US Dollar Index (DXY) – Technical Analysis

The Dollar Index (DXY) is trading at 106.83, down 0.10%, as it tests key technical levels within an upward channel on the 2-hour chart. The $106.76 pivot point is crucial for near-term direction.

Immediate resistance stands at $107.19, with the next target at $107.51 if the index manages a breakout. On the downside, immediate support lies at $106.42, with further weakness exposing $106.04.

The 50 EMA at $106.83 aligns with the current price, while the 200 EMA at $106.47 provides a strong base for support. The upward channel suggests a bullish bias above $106.76, but a break below this pivot could shift sentiment bearish.

US 10-year Bond Yields

The U.S. 10-year Treasury yield is at 4.38%, showing signs of consolidation after its recent rise, as investors remain cautious ahead of the Federal Reserve’s outlook. The upward trend reflects concerns over persistent inflation and strong economic data, which could delay rate cuts.

Technically, the yield is holding above its 50-day EMA at 4.36%, suggesting continued support. A move above 4.44% may signal further strength, boosting the U.S. Dollar Index (DXY) as investors seek better returns on U.S. assets. However, a drop below 4.36% could shift sentiment, weakening the dollar and supporting gold.

Traders are watching the Fed’s next move closely, as it will shape both bond yields and broader market dynamics.

Sterling Steady as UK Inflation Matches Expectations

The British Pound (GBP) remains steady after UK CPI y/y hit 2.6%, meeting forecasts and up from 2.3% previously. Core CPI rose to 3.5%, slightly below the expected 3.6%, reflecting easing inflationary pressures.

PPI Input stalled at 0.0%, while PPI Output improved to 0.3%. Retail Price Index (RPI) climbed to 3.6%.

Markets await HPI y/y at 10:30 AM and the CBI Industrial Order Expectations at 12:00 PM for further directional cues on Sterling.

GBP/USD Technical Analysis

The GBP/USD pair is trading at $1.27086, holding steady as it hovers above the key $1.26952 pivot point on the 2-hour chart. Immediate resistance sits at $1.27698, with the next target at $1.28108 if bullish momentum continues. On the downside, immediate support lies at $1.26511, with deeper support at $1.26046.

Technical indicators are mixed, with the 50 EMA at $1.26926 providing slight bullish support and the 200 EMA at $1.27049 capping gains. A sustained move above $1.26952 confirms a bullish bias, while a break below this pivot could signal selling pressure.

EUR/USD Technical Forecast

The EUR/USD pair is trading at $1.05101, up 0.19%, reflecting mild bullish momentum as it consolidates on the daily chart. The $1.04744 pivot point acts as critical support, aligning with the 23.6% Fibonacci retracement level.

On the upside, immediate resistance at $1.05640 coincides with the 38.2% Fibonacci retracement level, a key hurdle for further gains. A break above this could open the door to the 50% Fibonacci retracement level at $1.06342, a significant target for buyers.

However, the 50 EMA at $1.06529 and 200 EMA at $1.08035 signal a bearish trend, capping momentum. A breach below $1.04744 could reverse gains sharply, exposing the pair to deeper support at $1.04041.