US Dollar Price Forecast: Fed Hike Bets Fade as EUR/USD and GBP/USD Rally

On Wednesday, August 17, the U.S. dollar faced pressure as economic data released showed a slowdown, eroding the chances of another Federal Reserve rate hike. Retail sales for July fell, signaling a decline in consumer sentiment and an increase in the Consumer Price Index (CPI) and Producer Price Index (PPI). The probability of a September rate hike dropped to 30%, down from 50% previously.

Now, markets predict a 70% chance of no change in interest rates. The Federal Reserve's July meeting documents are expected to be released, potentially shedding light on concerns about the economic slowdown.

The outlook for the euro appears promising with the European Central Bank (ECB) potentially being the first to raise interest rates in September. A Reuters poll from August 10-13 indicated that 57 of 69 economists expected a 25-basis point increase to 2.50% in September. Meanwhile, inflation in the eurozone rose to 2.9% in July, attributed to ongoing inflationary pressures from the Middle East conflict. Economists also raised their growth outlook for 2026 to 0.8%.

Meanwhile, the British pound remains relatively strong, bolstered by a surge in UK second-quarter GDP growth of 0.4% in the second quarter and 0.3% in June. The UK's growth has been the fastest among G7 economies so far this year. While this data holds some promise for the pound, traders will closely monitor data releases for inflation and labor market conditions this week.

For currency traders on August 17, the focus is on narrowing policy divergence, as a slower U.S. rate hike outlook contrasts with the possibility of tightening by the ECB and Bank of England (BoE). This situation will influence the EUR/USD, USD/JPY, and GBP/USD pairs. The U.S. Dollar Index (DXY) is currently testing $99.41 on the daily chart, after dipping below a rising trendline following the spring lows.

The DXY has also fallen below the $100.23 50-day Exponential Moving Average (EMA) and the $99.90 100-day EMA, intensifying pressure on the structure. The latest bearish candle has pushed the DXY into the $99.38-$99.42 support zone, making it a critical level for future movement. The Relative Strength Index (RSI) stands at 36, indicating weak momentum and a potential move into oversold territory.

Immediate resistance for the DXY is at $100.06, $100.82, and $101.62. A break below $99.38 could open the door to even lower levels, extending to $98.76 and $98.18.

For the GBP/USD pair, price is currently at $1.3558 on the 2-hour chart, showing a trend of higher highs and higher lows. The pair is above the 50-EMA at $1.3514 and the 100-EMA at $1.3493, further supporting a positive trend. Bullish candlesticks have revealed steady buying pressure, though it remains close to important resistance levels.

The RSI for GBP/USD is at 67, a strong increase, signaling potential overbought conditions. Key resistance levels for GBP/USD are projected at $1.3587, $1.3627, and $1.3670, while support can be found at $1.3539, $1.3475, and $1.3434. From a bullish perspective, GBP/USD is likely to hold above $1.3510 and $1.3539. A breakout above $1.3587 could trigger a run toward $1.3627.

However, if the bulls fail to maintain the trendline, it may weaken the bullish structure. For EUR/USD, price is at $1.1598 on the 4-hour chart, breaking above a consolidation zone and $1.1580. The pair is above the 50-EMA at $1.1539 and the 100-EMA at $1.1512, indicating short-term momentum in favor of buyers. The RSI is in the overbought region at 72, suggesting a possible pullback or consolidation in the short term.

Resistance levels for EUR/USD are at $1.1622, $1.1655, and $1.1686, with support at $1.1580, $1.1545, and $1.1515. In light of these factors, the article concludes that the overall structure remains bullish as long as EUR/USD stays above the $1.1580 level. Should the pair break above $1.1622, the move could target $1.1655; a break below $1.1545 would invalidate the breakout.