US Dollar Price Forecast: Fiscal Risks Weigh on DXY; EUR/USD and GBP/USD Test Key Resistance

Key Points

• DXY remains technically bearish below 99.38, with immediate downside levels at 98.55 and 98.24.
• EUR/USD has formed a potential double top near 1.1712, increasing pullback risk despite broader recovery.
• GBP/USD is testing potential triple-top resistance around 1.3656–1.3676 while RSI signals overbought conditions.

Market Overview

On August 24, the US dollar started the day at multi-month lows as global investors shifted focus from short-term economic conditions to long-term fiscal credibility. Despite the Treasury Department's plan to double buybacks of 10- to 30-year debt, concerns linger regarding Washington's approach to long-term borrowing amidst a growing deficit. U.S. 30-year yields reached 5.337%, marking a 19-year high, and a slightly better-than-expected Services report did little to bolster the dollar's strength.

Investors are particularly attentive to Fed Chair Kevin Warsh's upcoming speech from Jackson Hole and July's inflation data for insights into future monetary policy directions.

Technical Analysis

US Dollar Index (DXY)

The DXY is currently at $98.89, having broken below the $99.38 support level. The price is below both the 50 and 100-period Exponential Moving Averages (EMAs), indicating a bearish sentiment. Immediate support levels are at $98.55 and $98.24, while resistance levels are at $98.99, $99.13, and $99.27.

GBP/USD

GBP/USD has reached $1.3648, testing a significant resistance area between $1.3656 and $1.3676, which has historically contained price movements. The RSI indicates overbought conditions at 71, suggesting potential consolidation or a downward move. Key support levels are at $1.3618, $1.3572, and $1.3526.

EUR/USD

The Euro has formed a double top near the resistance zone of $1.1700 to $1.1712, with a bearish EMA cross confirming negative sentiment. The RSI has eased to 59, indicating a cooling off of bullish conditions. Immediate support is at $1.1658, with further levels at $1.1641 and $1.1624.

Conclusion

The overall sentiment for the US dollar remains bearish, influenced by fiscal uncertainties and potential tightening from the ECB and BoE, which supports the Euro and Pound. Traders should closely monitor key resistance levels in GBP/USD and EUR/USD for potential market movements.