US Dollar Price Forecast: DXY Holds Firm on Iran Tensions

Author: Arslan Ali

Published: April 29, 2026

Key Points

• US inflation rises to 3.3% YoY, primarily due to a 12.5% increase in energy costs, complicating the Federal Reserve's policy outlook.
• The Fed is expected to maintain interest rates between 3.50% and 3.75% as inflation pressures persist despite signs of slowing growth.
• EUR/USD struggles near the 1.1700 mark due to the European Central Bank's (ECB) anticipated pause and a weak growth outlook.
• GBP/USD finds support above 1.3500 as the UK economy shows resilience amid inflation and labor market concerns.

Market Analysis

US Dollar Index (DXY)

The DXY is currently trading around 98.60-98.70, gaining traction as tensions regarding Iran and disruptions in the Strait of Hormuz drive investors towards safer assets. The March inflation figures exceeded expectations, rising to 3.3% YoY from 2.4%, largely due to soaring energy prices. The market consensus suggests the Fed will keep rates steady at 3.50-3.75%, with any comments from Powell regarding energy concerns being pivotal.

Euro (EUR/USD)

The EUR/USD pair is hovering just above 1.1700 as traders await the Fed's decision. The ECB is expected to maintain its interest rates at 2.00% on April 30, with Eurozone growth projected to remain moderate (1.1-1.3%). Despite rising energy costs, inflation remains stagnant at 2.0-2.2%, and geopolitical uncertainties continue to weigh on the euro.

Pound (GBP/USD)

GBP/USD is trading just above 1.3500, with March inflation figures aligning with expectations at 3.3% YoY. The Bank of England (BoE) is likely to keep rates at 3.75% on May 1, balancing inflationary pressures from energy costs against a declining unemployment rate of 4.9%. The UK economy appears more resilient than the Eurozone, providing some support for the pound.

DXY Outlook

The Dollar Index is struggling at 98.73, unable to maintain gains below the 99.00 level, which has turned from support to resistance. The price remains caught between the 50 EMA and the 200 EMA, indicating a fragile recovery. A rejection below 99.00 could lead to a decline towards 98.20 and 97.80, while a break above 99.20 might shift sentiment towards a potential rise to 100.00.

GBP/USD Forecast

GBP/USD is consolidating near 1.3500, maintaining its position above a key trendline. Resistance is noted at 1.3550-1.3580, which has hindered upward movement. If the trendline support around 1.3485 holds, a breakout could occur, potentially leading to levels around 1.3650. Conversely, a break below 1.3480 could jeopardize the bullish outlook, with possible declines to 1.3430 and 1.3380.

EUR/USD Analysis

The EUR/USD pair is clinging to its rising trendline just above 1.1700. However, the lack of momentum suggests that buyers are losing strength near resistance. A break below 1.1680 could lead to a swift decline to 1.1645 and 1.1575, while a clean break above 1.1750 could revive bullish sentiment, targeting 1.1800 and 1.1850.

Conclusion

The current market dynamics are heavily influenced by inflation data, central bank policies, and geopolitical tensions. Traders should remain vigilant as the Fed's decisions and economic indicators will significantly impact currency movements in the near term.