Is the US dollar gearing up for a significant reversal? There are early warning signs everywhere.

Watch today’s forex mid-week analysis to see how I’m trading the DXY, EURUSD, GBPUSD, and USDJPY this week!

US Dollar Index (DXY) Forecast

The US dollar could be on the verge of a significant turning point. For all of 2025, the DXY has trended lower steadily and aggressively. It’s been a relentless selloff that has wiped out several key levels.

However, no trend lasts forever, and a significant buy-side imbalance is evident near 106.00. Imbalances or inefficiencies like the one at 106.00 can often serve as magnets.

But without a technical trigger, imbalances like 106.00 don’t mean much. There also needs to be a trigger, such as a high-timeframe breakout, to confirm the reversal and open the door to those imbalances.

So far, USD bulls have cleared the 98.30 level. That was the first hurdle that I discussed in the last Weekly Forex Forecast. The next big test for buyers is the February trend line at 99.00.

That’s resistance for now, but a sustained break above would support the idea of a bullish reversal. It would also expose higher levels, such as 100.20 and 101.90.

Until then, the DXY remains range-bound and indecisive, oscillating between the 99.00 resistance level and the 98.30 support level.

EURUSD Forecast

The EURUSD uptrend could be in trouble as Tuesday’s session failed to hold above 1.1530. Additionally, the DXY broke above the 98.30 level I discussed in the Weekly Forex Forecast.

In that video, I shared how the DXY had been testing channel support from over a decade ago. I have also shared in recent weeks how the DXY 106.00 region could become a magnet.

The US dollar index left a significant imbalance at 106.00 during the March selloff. EURUSD shares a similar imbalance at 1.0600.

However, a couple of things need to occur to confirm these reversals.

First, EURUSD needs a sustained break below 1.1530 and 1.1440. That could confirm a significant top for the euro. So far, sellers have only dealt with 1.1530.

Second, the DXY needs to hold above 98.30, which is breaking today, and clear its February trend line at 99.00.

If that occurs, the EURUSD could target lower levels, such as 1.1275 and 1.1060. My final target on a confirmed top (if we get it) will be the 1.0600 region.

However, as mentioned above, the current price action serves as a warning sign. Both the EURUSD and DXY have work to do to confirm a full reversal pattern.

GBPUSD Forecast

GBPUSD is also flashing warning signs of a potential top. In previous videos, I discussed the similarities with the 2024 top, including a multi-month rising wedge and RSI bearish divergence.

The pound broke its rising wedge on Tuesday, closing the session right on the 1.3430 support area.

Where Wednesday’s session closes could determine if this key support area broke down on Tuesday. If the GBPUSD closes convincingly above 1.3430/40 on Wednesday, it will keep the area intact as support for now.

As with the DXY and EURUSD, the pound left a massive imbalance in the 1.2900 region during the April rally. That could serve as a magnet for GBPUSD if the breakdown is confirmed this week.

USDJPY Forecast

USDJPY remains range-bound between 145.40 resistance and 142.40 support. There has been no change to recent forecasts, but the potential remains.

One idea I have discussed in recent videos is a potentially weaker yen in the coming weeks. However, the Yen Basket remains above its 2020 descending trend line, so nothing is confirmed.

The same goes for USDJPY and other yen pairs. USDJPY is selling off from 145.40 yet again, so the pair remains range-bound until proven otherwise.

I’ll continue to monitor the Yen Basket as it tests its 2020 trend line. Recent price action suggests a possible buy-side fakeout, which could be bearish for the yen; however, I need to see more evidence before taking action.

• During the trading session on Tuesday, we saw the British pound dropped fairly significantly against the US dollar.
• This is perhaps simply due to the fact that we are mechanically trading back and forth in a range bound area, with the 1.34 level underneath offering massive support, while the 1.3650 level offers significant resistance.
• You should also keep in mind that the Federal Reserve is releasing an interest rate decision during the trading session on Wednesday, so people will be looking at this through the prism of what’s going on with the interest rate decision in the United States, and perhaps more important, the trajectory of interest rate policy.

Technical Analysis

The technical analysis for this market of course is somewhat bullish over the longer term, but in the short term, it looks like we are simply going to be neutral, which does make a certain amount of sense as we are waiting for that interest rate decision, but we also have a lot of questions asked about global risk appetite, as the US dollar of course is considered to be a safety currency, and the British pound is considered to be a little bit “more risky” than the greenback. Having said that, the market continues to see a lot of chop, and I think this will be the case in the short term.

Ultimately, I think this is a scenario where people will be very cautious with their position sizing, release it should be. However, if we were to break above the 1.3650 level on a daily close, that could really start to open up the bigger move to the upside. On the other hand, if we were to break down below the 1.34 level, that would of course be an area where the 50 Day EMA is racing toward, and it will almost certainly attract buyers.

It’s a market that’s been sideways for a couple of weeks, and I do think that makes quite a bit of sense considering that we had gotten here so quickly, and trends can only last for so long. With this being the case, I think you’ve got a scenario where buyers continue to support the market, but we need to get through the interest rate decision and much more breakout.

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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.

EUR/USD Analysis Summary Today

• Overall Trend: Bullish.
• Today’s EUR/USD Support Levels: 1.1470 – 1.1400 – 1.1320.
• Today’s EUR/USD Resistance Levels: 1.1580 – 1.1660 – 1.1730.

EUR/USD Trading Signals:

• Buy EUR/USD from the support level of 1.1385 with a target of 1.1560 and a stop-loss at 1.1290.
• Sell EUR/USD from the resistance level of 1.1640 with a target of 1.1400 and a stop-loss at 1.1710.

EUR/USD Technical Analysis Today:

Euro bulls are attempting to find additional positive momentum to resume their upward rebound at the start of this week’s trading. The currency pair jumped towards the 1.1615 resistance level, near its 43-month high, before experiencing selling pressure that pushed it towards the 1.1474 support level, settling around 1.1520 at the time of writing this analysis. According to performance across reliable trading platforms, the US Dollar has not found sustained support in global markets, with selling occurring at price rallies despite ongoing tensions in the Middle East. At the start of this week’s trading, oil prices declined, while stock markets achieved net gains.

Given the multitude of local and global risks, trading volatility is inevitable, and any escalation in the Middle East would signal a significant move in forex markets. Commenting on currency price performance, ING Bank stated: “The US Dollar’s rebound since the start of Israeli-Iranian attacks has been relatively limited, and it is now largely in decline. This is despite no indications of de-escalation in the region and continued support for oil prices. In our opinion, this once again indicates the market’s lack of confidence in the Dollar at the moment.”

However, the bank also noted that the EUR/USD pair is significantly overvalued, limiting opportunities for further gains; the short-term fair value is slightly below 1.110 according to their model, and a move above 1.1640 would push the pair beyond the triple standard deviation upper limit.

Trading Tips:

The EUR/USD trend remains upward, but it may face some volatility from the US Federal Reserve’s policy announcement today, in addition to the extent of investor risk aversion. Exercise caution.

In general, financial markets will continue to monitor Middle East developments in the short term as Israel and Iran continue to exchange military strikes. According to experts, there are concerns about the risk of a significant escalation, such as the closure of the main oil transit route through the Strait of Hormuz. A closure of the Strait of Hormuz would disrupt up to a third of global oil supplies, which analysts estimate could lead to crude oil prices rising to between $120 and $150 per barrel. The closure of the Strait would also impede natural gas flows from Qatar to Europe, exacerbating the negative terms of trade shock suffered by the EU energy sector, while providing a strong boost to alternative suppliers, the United States and Australia.

Therefore, this development would pose significant downside risks to the Euro.

Today’s EUR/USD Technical Levels:

Based on the daily chart performance, the overall outlook for the EUR/USD pair remains bullish so far. The trend will not be broken without the bears successfully pushing the currency pair to the vicinity of the 1.1370 and 1.1250 support levels, respectively. Currently, the 14-day RSI (Relative Strength Index) is in neutral territory and awaits further momentum for confirmation of an upward move. Conversely, the MACD (Moving Average Convergence Divergence) indicator is strongly trending upward. On the upside, a break of the 1.1630 resistance is important for further strengthening of bullish control over the EUR/USD trend.

Currency Markets Await Federal Reserve Announcement:

The US Federal Reserve will announce its latest interest rate decision today, Wednesday, at 9:00 PM Egypt time, with strong expectations of keeping rates at 4.50%. Before that, at 12:00 PM Egypt time, Eurozone inflation figures will be announced, which in turn will influence future expectations for European Central Bank policies. Overall, the Federal Reserve’s guidance and updated economic projections, including interest rate forecasts, will also be important for US Dollar sentiment. The updated projections from the Federal Reserve will inevitably be a key factor. In the previous update in March, the median forecast was for two rate cuts in 2025, with two more in 2026. According to experts, if the Federal Reserve keeps the US interest rate accommodative as expected, the US Dollar is likely to resume its decline due to deteriorating underlying conditions in the United States.

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The GBPJPY pair lost its positive momentum, affected by stochastic exit from the overbought that forces it to delay the bullish attack and motivate the attempts of gathering the gains by reaching 194.85.

Note that the stability of the trading within the minor bullish channel’s levels, and its support located near 194.40, which makes us keep the bullish suggestion, to wait for surpassing 195.70 level, then attempts to achieve new gains by targeting 197.45 level.

The expected trading range for today is between 194.65 and 196.80

Trend forecast: Bullish

The EURJPY pair recorded some extra gains by hitting 167.60 level, which forces it to form a temporary correctional rebound, affected by a stochastic attempt to exit the overbought level, providing chances for catching its breath and gathering the gains by reaching 166.70.

The price keeps providing mixed trading, but its repeated stability within the bullish channel’s levels and forming extra support at 166.00 level, so these factors make us keep the main bullish suggestion, which might target 168.00 level in the near period trading reaching the resistance level at 168.90.

The expected trading range for today is between 165.95 and 167.45

Trend forecast: Fluctuated within the bullish track