US Dollar Forecast: DXY Tests $97.80 on Fed Signals
Published: February 19, 2026
Key Points
- EUR/USD slips under $1.1820 demand zone, exposing $1.1765 and $1.1670 support levels.
- GBP/USD breaks below $1.3550 trendline, confirming short-term bearish momentum.
- US Dollar Index consolidates near $97.70 as hawkish Fed minutes clash with mixed policy signals.
Market Overview
Despite the hawkish minutes from the US Federal Reserve's January monetary policy meeting, the US Dollar Index (DXY) has consolidated its previous gains, remaining slightly subdued around the 97.70 level. This sluggish performance is attributed to mixed signals from Fed officials, leading the market to adopt a wait-and-see approach ahead of key US economic data.
US Economic Indicators
Some investors maintain a bullish outlook on the US dollar due to strong economic indicators, particularly the January Nonfarm Payrolls report, which exceeded expectations. This has led to speculation that the Fed may not need to cut rates aggressively, supporting the dollar's strength.
Mixed Signals from the Fed
The Fed's January minutes revealed a divide among policymakers regarding the need for further rate cuts. Some officials advocate for more cuts if inflation continues to decline, while others caution against premature easing, which could jeopardize the 2% inflation target. This uncertainty has kept dollar gains in check.
Geopolitical Tensions
Geopolitical risks, particularly tensions with Iran, are also bolstering the dollar's safe-haven status. Reports of potential US military action against Iran have prompted investors to seek refuge in the dollar, helping to maintain the DXY near recent highs despite low trading activity.
Technical Analysis
The US Dollar Index is currently trading around $97.69, testing a key confluence zone between $97.60 and $97.80. The 0.618 Fibonacci retracement level at $97.61 is being tested, alongside a long-term descending trendline from the $99.80 high. Immediate support is at $97.21, with further levels at $96.82 and $96.33. A break above $97.80 could target $98.46, while a rejection may pull prices back toward $97.20.
GBP/USD and EUR/USD Analysis
GBP/USD
GBP/USD is trading near $1.3499 after breaking below the $1.3550 trendline, confirming short-term bearish momentum. Immediate support is at $1.3478 and $1.3421, with resistance at $1.3550 and $1.3652.
EUR/USD
EUR/USD is currently at $1.1795, having slipped below the $1.1820 demand zone. The price is under pressure, with immediate resistance at $1.1820 and support at $1.1765 and $1.1672. A failure to reclaim $1.1820 could shift the trade structure to bearish.
Conclusion
As the market awaits the upcoming PCE inflation report, the outlook for the US dollar remains uncertain, influenced by mixed signals from the Fed and ongoing geopolitical tensions. Traders should monitor key support and resistance levels for potential trading opportunities.