US Dollar Price Forecast: DXY Breaks 99.38 as EUR/USD and GBP/USD Extend Gain

US Dollar Price Forecast: DXY Breaks 99.38 as EUR/USD and GBP/USD Extend Gain

Arslan Ali Butt

Fri, August 21, 2026 at 9:17 AM GMT+3 5 min read

US Dollar News: Fiscal Fears Weigh as Euro and Pound Hold Firm

The U.S. dollar begins August anticipating more pressure as investors respond negatively to increased speculation about Washington's ability to address increasing long-term Treasury financing costs. At nearly $4 billion each, the Treasury increased the number of buybacks for longer dated debt, although this had no effect on bond yields.

Instead, the wholesale purchase of Treasuries by the U.S. public has prompted market concerns regarding the solvency of the U.S. government and the value of its currency. Slightly under one percentage point, the dollar is expected to close the week at a lower level, while market expectations of a September Fed rate increase are approximately 33%. The minutes of the July FOMC meeting reflect ongoing concerns of many participants regarding the Fed's failure to achieve its inflation target.

The euro also has an easier monetary policy backdrop. The euro zone inflation rate was recorded at 2.9% for July. For July, activity in the business sector increased at its fastest pace in eight months. A Reuters survey demonstrates that 57 of 69 economists expect the euro zone inflation rate will be close enough to the ECB's target to motivate the ECB to raise its deposit rate to 2.50% by September.

The GBP is benefitting from lessening interest rate differentials. Inflation for the UK rose to 2.9% in July, slightly above the BoE's forecast, and second quarter GDP grew by 0.4%. However, the labor market is cooling. The unemployment rate is 4.9% and vacancies fell to 707,000 while private sector real wage growth was 2.8%. Markets are continuing to price a 25 bps hike by the BoE by year end.

U.S. fiscal policy uncertainty and the dollar for August 21 is the FX theme. The euro and the pound are supported by the risk of ECB and BoE tightening, respectively, while the dollar is affected by uncertainty.

The FX theme for August 21 suggests that U.S. fiscal policy and related dollar uncertainty are combining with risks of ECB and BoE tightening to support the euro and pound, respectively. The dollar is affected by uncertainty.

U.S. Dollar Index Technical Analysis: DXY Breaks $99.38 Support as Bears Target $98.41

The USD index trades at $98.73 on the daily chart after a break below the $99.38 support zone and the consolidation trendline. Bulls are also below the 50-day EMA at $100.05 and the 100-day EMA at $99.83. This confirms that the short-term structure is clearly bearish.

DXY's RSI is approaching the 30 level and is close to oversold territory. This would support a move to the mean, but the bearish momentum below the $99.38 breakout zone creates a weak market structure. Bulls have potential to test $98.41, $97.84, and $97.15. Should DXY trade above $99.38, $100.06, and $100.66 zones, resistance will form.

I believe the USD index will be bearish below $99.38. However, a short-term bounce to $100.06 is possible if the index does trade to get oversold and stretched. Further weakness beyond $98.41 could result in a test of the support zone at $97.84.

GBP/USD Technical Analysis: Pound Holds Above $1.3630 as Buyers Eye $1.3656

Currently, the GBP/USD pair trades at $1.3645, and holds a robust bullish structure on the 2-hour chart above the rising trend line. The pair is comfortably trading above the 50-EMA at $1.3588 and the 100-EMA at $1.3552, putting further confluence in buying interest for the pair in the short-term.

Candles on the 2-hour timeframe are showing signature consolidation above $1.3630, where the level has now turned to support from the recent breakout. RSI is at 71, indicating enough bullish momentum to push the pair into overbought levels. Upwards, $1.3656 provided resistance, with $1.3677 and $1.3695 levels behind that. On the pair's downside, $1.3630 is a potential support level, with $1.3606 and $1.3590 below that, and $1.3564 providing additional support.

Holding above $1.3630 maintains a bullish outlook for GBP/USD. A clear break above $1.3656 would place additional bullish interest on the pair to target $1.3677 and $1.3695. On the contrary, losing the support level at $1.3590 Would put selling pressure on the pair, and make a deeper pullback likely.

EUR/USD Technical Analysis: Euro Holds Above $1.1690 as Bullish Structure Extends

EUR/USD is currently trading at $1.1694 after a breakout above the consolidation zone. Bulls are above the 50 EMA at $1.1636 and the 100 EMA at $1.1600. A bullish trendline is also in the vicinity.

The latest candles show consolidation just below the $1.1706 resistance area after a clear rally. The RSI is about 71, indicating momentum in the upward direction is weakening, and a pause in this direction is probably before the next major directional movement. Immediate resistance is at $1.1706 with $1.1727 and $1.1754 as the next areas of resistance. Support is at $1.1669, with $1.1644 and $1.1614 and the EMA zone around $1.1600 as the next levels of support.

From current levels, I am bullish on EUR/USD as long as it is above $1.1669. If EUR/USD breaks $1.1706, I can see the pair going to $1.1727-$1.1754. A break of $1.1644 will take EUR/USD into a deeper correction.

This article was originally posted on FX Empire

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