US Dollar Forecast: Fed’s 25 bps Rate Hike Expected; GBP/USD and EUR/USD Outlook

US Dollar Awaits Fed Decision

The US Dollar remains under pressure following mixed retail sales data. Core retail sales grew by 0.1%, below the expected 0.2%, while overall retail sales also increased by 0.1%, contrasting with the forecasted -0.2% decline.

Markets now await the FOMC meeting on Wednesday, where the Federal Reserve is expected to raise the Federal Funds Rate by 25 basis points to 5.50%.

The FOMC statement and press conference could provide further direction for the dollar, particularly as traders look for guidance on future rate hikes or pauses.

US Dollar Index (DXY) – Technical Analysis 

The Dollar Index (DXY) is trading at $100.864, down 0.16%, hovering right around its pivot point at $100.860. This indicates the index is at a critical juncture.

Immediate resistance sits at $101.047, followed by higher targets at $101.204 and $101.351. On the downside, key support levels to watch are $100.555, $100.322, and $100.106.

The 50-day EMA at $101.117 suggests near-term bearish momentum, while the 200-day EMA at $101.890 reinforces a broader downtrend.

A break above the $100.860 pivot could shift momentum toward a bullish bias, but as long as prices remain below this level, the outlook remains bearish.

UK Inflation Steady at 2.2%, Sterling Holds Ground

The UK’s CPI remained steady at 2.2% year-over-year, in line with expectations. The stable inflation data kept the British Pound (GBP) relatively flat, as traders now focus on the upcoming Bank of England meeting for further clues on monetary policy.

Any signals of rate adjustments could influence the next moves in the currency market.

GBP/USD Technical Forecast

The GBP/USD is trading at $1.31860, holding steady just above the pivot point of $1.31564, indicating a potential continuation of its upward trend. Immediate resistance is seen at $1.32272, followed by $1.32665 and $1.33108.

On the downside, the first support sits at $1.31142, with further levels at $1.30653 and $1.30111.

The 50-day EMA at $1.31424 supports the current bullish momentum, while the 200-day EMA at $1.30481 reinforces the longer-term uptrend.

As long as the pair stays above the $1.3156 pivot, the upward channel remains intact, suggesting more buying interest. A break below this level, however, could shift the bias towards selling.

Euro Steady as CPI Matches Forecast; Eyes on Buba Speech

The Euro (EUR) remains stable following the release of Final CPI, which held at 2.2% year-over-year, matching expectations. Core CPI also aligned at 2.8%.

Markets now shift focus to the upcoming speech from German Buba President Nagel, which could offer insights into future European Central Bank policy direction and impact the Euro’s outlook.

EUR/USD Technical Forecast

The EUR/USD pair is currently trading at $1.11188, up 0.08%, and hovering just above its pivot point at $1.11107, signaling potential bullish momentum. Immediate resistance is seen at $1.11453, with higher targets at $1.11753 and $1.12007.

On the downside, key support levels are at $1.10827, followed by $1.10525 and $1.10213.

The 50-day EMA at $1.10880 and the 200-day EMA at $1.10355 support a near-term bullish bias. A breakout above $1.1110 suggests buying opportunities, while a break below could trigger a sharp sell-off.

For now, the pair remains bullish above the $1.11107 pivot, with traders eyeing the next resistance level for confirmation of a stronger uptrend.