US Dollar Price Forecast: DXY Weakens After Fed Signals

Author: Arslan Ali

Published: February 4, 2026

Key Points

• The US Dollar Index (DXY) is trading near 97.30, reflecting a decline as markets anticipate two Federal Reserve rate cuts.
• Despite the nomination of Kevin Warsh as the new Fed chair, the dollar remains under pressure due to expectations of rate cuts.
• Technical analysis shows a descending trendline capping DXY near 97.70, with Fibonacci support at 97.22 and potential downside risk towards 96.80.

Market Overview

The US Dollar has turned bearish following the nomination of Kevin Warsh as the next Federal Reserve chair. The DXY index, which measures the dollar against six major currencies, has slipped after two days of gains, currently trading around 97.30. The primary driver of this decline is the market's expectation of future Fed rate cuts, which has made investors hesitant to buy the dollar.

Fed Comments and Economic Indicators

Comments from Fed officials have reinforced the expectation of rate cuts. Fed Governor Stephen Miran indicated that inflation is not a significant concern, suggesting a 1% rate cut this year, while Richmond Fed President Thomas Barkin acknowledged that inflation is above target but the economy remains strong.

Additionally, President Trump signed a spending bill that ended a partial government shutdown, which may help stabilize the dollar's losses. Investors are closely monitoring upcoming economic reports, including the US ADP jobs report and ISM Services PMI, which could further influence the dollar's performance.

Technical Analysis of the US Dollar Index

The DXY is currently around $97.40, having rebounded from a low of $95.55. The price remains below a downward trendline from January highs, indicating a cautious outlook. Recent trading sessions have shown hesitation, with the DXY holding above the 50% Fibonacci retracement level at $97.22. The 200-EMA is positioned between $97.60 and $97.70, presenting a significant resistance area.

The Relative Strength Index (RSI) has eased back to 55, indicating slowing momentum. A break above $97.80 could lead to a target of $98.25, while a rejection could push the index lower towards $96.80.

GBP/USD and EUR/USD Forecasts

GBP/USD

The GBP/USD pair is trading near $1.373, showing a rebound after holding above the $1.365 to $1.368 support area. The price is following a rising trendline, maintaining a positive outlook. A break above $1.375 could target $1.386, while a fall below $1.365 would weaken the outlook.

EUR/USD

The EUR/USD pair is steady around $1.183 after pulling back from a high of $1.20. The price is supported by a rising trendline and remains above the 200-EMA at $1.178. A move above $1.190 could lead back towards $1.20, while a drop below $1.178 poses risks for a larger decline to $1.170.

Conclusion

The US Dollar is facing significant pressure from anticipated Fed rate cuts, despite some positive economic signals. Traders should remain vigilant regarding upcoming economic reports and technical levels that could influence market movements.