US Dollar Price Forecast: Hawkish Fed and Middle East Tensions in Play– GBP/USD and EUR/USD

Market Overview

During Monday’s Asian session, the U.S. Dollar Index (DXY) edged above 99.00, marking a two-week high as investors reacted to geopolitical unrest and the Federal Reserve’s firm policy stance.

Safe-Haven Flows Support USD on Middle East Escalation

The dollar’s strength followed joint U.S.-Israeli strikes on Iranian nuclear facilities, heightening market anxiety. In response, Iran’s Foreign Minister labeled the attacks “outrageous” and warned of “lasting consequences.” These developments pushed investors toward the dollar as a defensive asset, amid broader concerns about regional conflict.

Fed’s Higher-for-Longer Policy Adds to Bullish Pressure

Beyond geopolitical catalysts, the Federal Reserve’s guidance last week offered limited scope for near-term rate cuts. Projections indicated just one 25-basis-point cut in both 2026 and 2027, reinforcing the “higher-for-longer” narrative. This has curtailed expectations for immediate policy easing and bolstered USD demand.

DXY Upside Constrained by Broader Risks

Despite bullish undertones, the dollar’s upside faces resistance from lingering economic uncertainty. Concerns over a slowing U.S. economy and unpredictable trade policies are tempering buying momentum. Traders now look to global flash PMIs for fresh clues on macro conditions and potential shifts in Fed expectations.

US Dollar Index (DXY) – Technical Analysis

The Dollar Index (DXY) is holding firm above $99.00, supported by a clean ascending channel that’s been in play since June 13. Price has reclaimed both the 50 EMA ($98.74) and the 200 EMA ($98.86), signaling bullish control in the short term. The recent rejection at $99.16 reflects minor exhaustion, but as long as DXY stays above $98.87—the mid-channel support—momentum remains constructive.

Traders are watching $99.38 and $99.64 as the next resistance targets. A break above could reignite dollar strength, especially if macro risks persist. On the downside, $98.55 and $98.27 remain key levels to monitor for a breakdown. Trendline support and higher lows continue to define the structure.

GBP/USD Technical Analysis

GBP/USD is trading near $1.3437, struggling to regain bullish momentum after last week’s sharp drop. The pair remains capped below the $1.3465 pivot and faces dual resistance from the 50 EMA ($1.3465) and a descending trendline, keeping the short-term structure bearish.

The 200 EMA at $1.3490 adds another layer of resistance. A break above these levels could open the door toward $1.3511 and $1.3556. However, failure to clear the $1.3465 zone may invite renewed selling pressure, with support seen at $1.3388 and $1.3354.

The lower highs pattern and rejection candles near the trendline suggest sellers are still in control unless bulls reclaim higher ground. For now, the bias remains cautiously bearish while below $1.3465.

EUR/USD Technical Forecast

The EUR/USD pair is hovering around $1.1497 after facing rejection at the $1.1506 resistance, which aligns with the 50 EMA. Price remains confined within a descending channel, and despite a strong bounce from the $1.1450–$1.1460 support zone near the 200 EMA, bullish momentum is fading.

A clean break above $1.1506 could challenge $1.1544, but failure to sustain above this level keeps the bearish structure intact. The channel midpoint is acting as short-term resistance, with sellers stepping in near every retest.

On the downside, $1.1450 remains critical—below that, $1.1409 becomes the next line of defense. As long as EUR/USD trades below the upper boundary of this channel, the short-term bias remains cautious with a slight bearish tilt.