Dollar Forecast: US Dollar Fails to Hold 99.00 – Sinks Below 98.00 - What’s Next?

Jasper Osita - Market Analyst

2025-07-23 13:42:27

Dollar rejects 99.00 and breaks below 98.00, confirming bearish momentum.
Risk-on flows and Fed pause bets drive capital away from the USD.
Downside targets at 97.00 and 96.37 if bearish Fair Value Gap holds as resistance.

Market Narrative: Dollar Breaks Down After Structural Rejection

The US Dollar Index (DXY) has decisively turned lower after failing to reclaim the psychological 99.00 level, marking a key shift in both sentiment and structure. A clean rejection from a 4H Fair Value Gap (FVG) at the top of the previous range triggered a strong selloff, breaking below 98.00 and now targeting deeper liquidity levels. This development comes amidst an improving risk environment globally, softening U.S. inflation, and growing belief that the Fed will remain on pause through the summer. Political uncertainty, including potential interference in Fed independence, further undermines investor confidence in the USD.

Drivers Behind the USD Selloff

Failed Breakout + Technical Rejection from 99 Level

DXY attempted a move above 99.00 but was met with strong selling pressure near a clearly defined 4H Fair Value Gap.
The rejection confirms distribution at premium prices and traps late buyers, accelerating downside momentum.

Fed Pause Expectations Gain Traction

U.S. CPI came in softer than expected, pushing markets to expectations for pro-longer pause on interest rates.
Multiple Fed officials hinted at a prolonged hold, reinforcing dovish market positioning.

Risk Sentiment Shifts to “Risk-On” Mode

Nasdaq and S&P 500 hit new all-time highs.

Gold and crypto assets are climbing—indicating a rotation away from defensive USD exposure.

Political Volatility Amplifies USD Fragility

Ongoing speculation over Trump–Powell tension raised alarm over the Fed’s independence.
With the August 1 tariff deadline looming, uncertainty is adding to USD’s instability.

Technical Outlook: Structure Break Confirmed

DXY rejected the Fair Value Gap and has now broken decisively below the 98.00 handle, confirming a shift in market structure. This is inline with Monday’s weekly forecast: Weekly Forecast: Nasdaq & S&P 500 Hit All-Time Highs, XRP Leads Crypto Breakout, Gold Eyes $3,400

Bullish Scenario: FVG Reclaim and Breakout Continuation

If the U.S. dollar reclaims the Bearish FVG and holds above 97.90–98.30, we could see a short-term bullish reversal, targeting upside inefficiencies and liquidity pools.

Reasons for Bounce:

Rejection from oversold area (short-term profit taking)
FVG + Short Term Range Breakout
Risk-off flows (e.g., geopolitical flare-up)
Short-covering rally

Targets:

98.50 – Gap fill
99.00 – Psychological + structure
99.50 – Range high liquidity

Bearish Scenario: FVG Acts as Resistance and Downtrend Resumes

If DXY fails to reclaim the Bearish FVG by breaking and closing above, and price gets rejected at 97.90–98.20, we likely see continuation to the downside toward the next major support.

Reasons for Drop:

Continued USD weakness from Fed pause bets
Bearish reaction from FVG zone
Bearish technical structure remains intact
Liquidity below remains uncollected

Logical Targets:

97.00 – Psychological round level
96.50 – Previous breakout zone
96.37 – Higher timeframe demand + 2025 ATL

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This content may have been written by a third party. ACY makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplies by any third-party. This content is information only, and does not constitute financial, investment or other advice on which you can rely.

Autor

Jasper has been in the markets since 2019 trading currencies, indices and commodities like Gold. His approach in the market is heavily accompanied by technical analysis and of course, supported by fundamentals. He has a background in trading proprietary firms and has been teaching students how to navigate themselves in the markets from basic to advance concepts.

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Dollar Forecast: US Dollar Fails to Hold 99.00 – Sinks Below 98.00 - What’s Next?

Market Narrative: Dollar Breaks Down After Structural Rejection

Drivers Behind the USD Selloff

Failed Breakout + Technical Rejection from 99 Level

Fed Pause Expectations Gain Traction

Risk Sentiment Shifts to “Risk-On” Mode

Political Volatility Amplifies USD Fragility

Technical Outlook: Structure Break Confirmed

Bullish Scenario: FVG Reclaim and Breakout Continuation

Bearish Scenario: FVG Acts as Resistance and Downtrend Resumes

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