The U.S. dollar is holding steady near 97.40 as traders await fresh guidance from Federal Reserve officials, with market focus on how monetary policy will unfold in the coming months. Investors have scaled back expectations for an October rate cut, with the CME FedWatch Tool showing the probability of no cut rising to 10.2% from 8.1% last Friday. This shift reflects caution among traders as the Fed continues to signal its commitment to balancing economic growth with persistent inflationary pressures. The “dot plot” still implies two additional quarter-point cuts this year, but Chair Jerome Powell has emphasized that policy will remain data-dependent, leaving markets in a neutral, range-bound state.
Divergent views among Fed officials add to uncertainty. St. Louis Fed President Alberto Musalem described last week’s cut as a precautionary move to protect the labor market but warned of “limited room” for further reductions. In contrast, Governor Stephen Miran dissented, advocating for a larger 50-bps reduction to address economic risks. These differences underscore the complexity of Fed policy and contribute to cautious positioning in currency and equity markets. Investors are now turning attention to preliminary September S&P Global PMI data, as softer readings could weigh on the dollar, while stronger results may reinforce expectations for a measured pace of easing.
Technical Outlook – US Dollar Index (DXY)
The Dollar Index is trading around 97.39, holding support near 97.29. Resistance lies at the 50-EMA (97.40) and 200-EMA (97.78), with a descending trendline adding further pressure. RSI at 50 reflects a neutral tone. Immediate support levels are 96.91 and 96.55, while a break above 97.78 would open the path toward 98.08 and 98.44. Overall, dollar momentum remains capped as traders await Powell’s remarks for direction.
GBP/USD Technical Analysis
Sterling trades at 1.3519, stabilizing after falling from recent highs near 1.3727. The pair has broken below its ascending channel, with both the 50-EMA (1.3534) and 200-EMA (1.3510) serving as immediate resistance. RSI near 46 reflects neutral momentum after last week’s decline. Key resistance is at 1.3560, while support rests at 1.3450. A break below 1.3450 could expose 1.3395 and 1.3332, whereas reclaiming 1.3560 would relieve pressure and allow a retest of 1.3589.
EUR/USD Technical Forecast
The euro is consolidating around 1.1786 after bouncing from support at 1.1726, remaining above its broader ascending channel but showing softened momentum. The 50-EMA (1.1770) and 200-EMA (1.1705) provide underlying support, while resistance is seen at 1.1820 and 1.1874. RSI near 52 indicates balanced conditions with no clear bias. A daily close above 1.1820 could target 1.1875, while slipping below 1.1768 risks another decline toward 1.1726.
In summary, the US dollar remains range-bound ahead of Fed guidance, while GBP/USD and EUR/USD are consolidating near key technical levels. Traders are advised to watch pivotal supports and resistances, as further direction is likely to be driven by upcoming economic data and any signals from Fed Chair Powell.
