US Dollar Forecast: Weak Consumer Confidence Weighs on USD – GBP/USD and EUR/USD Outlook

Market Overview

The US Dollar Index (DXY) continued its downward slide, breaking below the crucial support level of 106.700 on Monday, February 24, 2025. This decline was driven by weaker-than-expected US economic data, fueling concerns about the strength of the US economy.

Flash Services PMI dropped to 49.7, falling short of the anticipated 53.0 and signaling a contraction in the service sector. Existing Home Sales also disappointed, coming in at 4.08M compared to the forecast of 4.13M, while the University of Michigan’s Consumer Sentiment dipped to 64.7, below expectations of 67.8. These figures suggest growing economic uncertainty, contributing to bearish sentiment in the Dollar Index.

Looking ahead, pivotal US economic releases this week include CB Consumer Confidence on Tuesday (forecast 103.3 vs. previous 104.1), Prelim GDP q/q on Thursday (forecast 2.3%, unchanged), and Core PCE Price Index m/m on Friday (forecast 0.3% vs. previous 0.2%).

Additionally, Unemployment Claims are projected at 220K, slightly above the prior 219K. These data points will be crucial in shaping market sentiment and determining the next move for the US Dollar Index.

US Dollar Index (DXY) – Technical Analysis

The Dollar Index (DXY) is trading at $106.521, up by +0.04%, but it’s struggling to break above the pivot point at $106.746. This level is crucial because it coincides with the 50 EMA at $106.972, which is acting as a strong resistance.

If the DXY manages to break above this resistance, it could target the next resistance at $107.365 and potentially $107.952.

However, if it remains below $106.746, the outlook stays bearish, supported by the downward trendline. Immediate support is at $106.111, with further downside risk to $105.425. As long as prices remain below the pivot point, the selling bias continues.

GBP/USD Technical Analysis

GBP/USD is trading at $1.26457, showing a slight gain of +0.04% and holding above the pivot point at $1.26217. This level is crucial as it aligns with the upward trendline and is reinforced by the 50 EMA at $1.25843, indicating continued buying interest.

If GBP/USD breaks above the immediate resistance at $1.27252, it could target the next resistance at $1.27978, signaling further bullish momentum.

On the downside, a break below $1.26217 could trigger selling pressure, with immediate support at $1.25375 and a deeper support level at $1.24532. As long as prices stay above the pivot point and the 50 EMA, the outlook remains bullish.

EUR/USD Technical Forecast

EUR/USD is trading at $1.04845, hovering just above the pivot point at $1.04669, which is a key support level to watch. The pair is showing signs of bullish momentum, supported by the 50 EMA at $1.04473 and an upward trendline, indicating that buyers are still in control.

If EUR/USD breaks above the immediate resistance at $1.05342, it could head toward the next resistance at $1.05860.

On the downside, a break below $1.04669 could shift the trend to bearish, targeting immediate support at $1.04088 and potentially $1.03509. As long as it stays above the pivot point, the outlook remains cautiously bullish.