U.S. Dollar Weakens After Inflation Eases and Debt Concerns Mount—Analysis for EUR/USD, GBP/USD

Market Overview

The US Dollar Index (DXY) slipped toward $99.52 during early US trading, marking its fourth straight day of losses. The drop reflects investor caution ahead of the S&P Global PMI release, amid a weakening economic outlook, a recent credit downgrade by Moody’s, and growing expectations for Federal Reserve rate cuts in 2025.

Credit Downgrade and Fed Remarks Add Pressure

Moody’s lowered the US credit rating from Aaa to Aa1, citing unsustainable debt growth. Federal debt is projected to climb from 98% of GDP in 2023 to 134% by 2035, while the budget deficit could hit 9% of GDP.

Rising debt servicing costs, coupled with increased entitlement spending and declining revenues, are dimming the fiscal outlook. Federal Reserve officials have also flagged risks.

At a recent Fed panel, Presidents Daly, Hammack, and Bostic warned of falling consumer confidence and the risks of erratic trade policy.

Cooling CPI and PPI prints and weak retail sales have strengthened bets on further Fed easing—adding downward pressure on the dollar.

US Dollar Index (DXY) – Technical Analysis

The U.S. Dollar Index (DXY) is trading at $99.52, struggling below a broken ascending trendline and trapped beneath the $99.82 pivot. Price recently sliced through both the 50-EMA at $100.24 and 200-EMA at $100.77, signaling a loss of near-term momentum.

Structure-wise, DXY failed to hold its higher low pattern and is now consolidating near key support. Immediate resistance is at $99.83, followed by $100.16. On the downside, watch $99.18 and $98.56 as the next supports.

Candlesticks are showing small bodies and wicks, suggesting indecision—possibly a base forming or just a pause before further decline. For now, bears hold control unless price reclaims $100+ with conviction.

GBP/USD Technical Analysis

The GBP/USD is holding steady at $1.3428, consolidating near the top of a rising channel that’s guided price action since mid-May. The pair recently reclaimed the $1.3410 level, which now acts as a near-term pivot.

Immediate resistance is seen at $1.3468, with a break above that opening the door toward $1.3513 and potentially $1.3568. Price remains comfortably above the 50-EMA at $1.3346 and the 200-EMA at $1.3233, reinforcing the bullish trend.

Small-bodied candles near resistance suggest hesitation, but as long as higher lows hold, the structure favors the bulls. A pullback toward $1.3410 or $1.3335 could offer better entry for continuation higher.

EUR/USD Technical Forecast

The EUR/USD is holding at $1.1328, hovering just above a key breakout zone near $1.1311, which previously acted as descending trendline resistance. Price briefly challenged the $1.1377 resistance but is now stalling with small-bodied candles—often a sign of indecision.

A successful retest of the trendline could confirm support and fuel another leg higher. Immediate resistance is $1.1377, followed by $1.1425. On the downside, support is seen at $1.1300 and $1.1269.

The 50-EMA at $1.1257 and 200-EMA at $1.1205 remain upward-sloping, reinforcing bullish structure. If momentum holds, bulls may target $1.1475 next, but failure to hold $1.1310 opens a potential slide back toward $1.1269.