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With US Dollar ‘Rebound’ Waning, EUR/USD and GBP/USD Could Bounce

The US dollar’s rebound shows signs of exhaustion, opening the door for EUR/USD and GBP/USD to recover ahead of key US inflation and jobs data.

Matt Simpson
Matt Simpson

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With US Dollar ‘Rebound’ Waning, EUR/USD and GBP/USD Could Bounce

The US dollar’s rebound appears to be running out of steam, raising the prospect of a recovery in EUR/USD and GBP/USD ahead of key US data releases. With inflation figures still due despite the government shutdown and jobless claims on schedule, weaker-than-expected readings could quickly undermine the greenback and reignite bullish momentum in the euro and British pound.

 

 

US Dollar Weakness Could Lift EUR/USD and GBP/USD

On Monday, I outlined my bias for the US Dollar Index to rebound against last week’s sell-off, which I expected would pressure EUR/USD and GBP/USD lower in the near term. I also noted that any retracements in the euro and British pound could be limited before both currencies resume their upward trends. I believe we’re now entering that phase of the outlook, so today I’ll update my key levels.

Keep in mind that US inflation data is still scheduled for release tomorrow despite the ongoing government shutdown. The weekly jobless claims report will also be published today and remains one of the few data sets continuing on schedule. Weakness in either release could quickly feed back into a softer US dollar on renewed bets of Fed rate cuts.

Dashboard of major forex pairs as of 22 October 2025, showing the US dollar losing momentum against key currencies. Includes 60-day line charts and 10-day candlestick charts for EUR/USD, GBP/USD, AUD/USD, NZD/USD, USD/CAD, USD/JPY and USD/CHF, highlighting signs of potential recovery in the euro and British

Chart prepared by Matt Simpson – source: LSEG

 

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US Dollar Index (DXY) Technical Analysis

It has been a decent start to the week for the US dollar, having staged a three-day countertrend rally from its 50-day EMA. However, if there’s one thing missing from this rebound, it’s conviction — both volume and bullish volatility are lacking. Daily trading volume has not only been trending lower for nearly two weeks but is now running at roughly half its 20-day average.

Given that this decline in volume coincides with the dollar’s bounce, it suggests the move so far is corrective. Also note the doji that formed on Wednesday, indicating a loss of bullish momentum — hence, I’m now on guard for a potential swing high.

  • The weekly R1 sits near the 99 handle, which could attract sellers if the dollar initially pushes higher.
  • The weekly pivot at 99.41 serves as a near-term downside target; a break below it would bring the 50-day EMA and high-volume node (HVN) at 97.63 into focus.
  • A move above the 99.28 high and 200-day EMA would invalidate the near-term bearish bias.

 

Daily chart of the US Dollar Index (DXY) showing a three-day countertrend rebound from the 50-day EMA, with volume trending lower to around half its 20-day average. The chart highlights potential resistance near the weekly R1 pivot at 99 and support at the 50-day EMA and high-volume node (HVN) around 97.63, suggesting the recent bounce may be corrective.

Chart analysis by Matt Simpson - data source: TradingView

 

EUR/USD Technical Analysis: Euro vs US Dollar

The euro declined for a third consecutive session against the US dollar, taking EUR/USD back to its monthly S1 pivot point near 1.1588. A small doji candle formed on Wednesday around this key support level, suggesting that bearish momentum may be fading. Also note that the weekly S1 pivot aligns with prior cycle lows, offering further potential support should we see another bout of volatility before a rebound.

If my assumption of a developing swing high in the US Dollar Index (DXY) proves correct, EUR/USD could now stage a recovery. The 50-day EMA (1.1664) represents a logical interim upside target for bulls over the near term, while a sustained break above that level would bring the weekly R1 pivot, monthly pivot, and the 1.1780 high into focus.

Daily chart of EUR/USD showing the euro stabilising near its monthly S1 pivot around 1.1588 after three days of decline against the US dollar. A doji candle signals waning bearish momentum, with potential upside targets at the 50-day EMA (1.1664), weekly R1 pivot, and 1.1780 resistance level.

Chart analysis by Matt Simpson - data source: TradingView EUR/USD

 

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GBP/USD Technical Analysis: British Pound vs US Dollar

The bounce from the 200-day EMA worked well — eventually. GBP/USD showed intent to rally from this key moving average a week last Friday, but it wasn’t until last Tuesday’s bullish hammer that we saw the real bounce materialise. The pair reached my upper target near the October VPOC, and since then, my near-term bearish bias has played out nicely this week.

Given Wednesday’s bullish hammer and the fact we’ve now seen four consecutive bearish sessions, I’ve shifted back to a near-term bullish bias. Note that the weekly S1 pivot sits just above the 200-day EMA and the 1.3278 support level, should momentum dip lower once more.

  • Overall, bulls may look to buy dips towards Wednesday’s low and maintain a bullish bias while prices remain above the 200-day EMA (1.3274).
  • 1.35 could be the next target for bulls, near the monthly pivot point and September VPOC.
Daily chart of GBP/USD showing the pair rebounding from its 200-day EMA with a bullish hammer pattern. The chart highlights key support around 1.3278 near the weekly S1 pivot and 200-day EMA, and resistance near the October VPOC, suggesting a near-term bullish bias above the 1.3274 level.

Chart analysis by Matt Simpson - data source: TradingView GBP/USD

 

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View the full economic calendar

 

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

 

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